Does related variety foster regional entrepreneurship? Evidence from European regions

Abstract

Several studies have identified positive effects of related variety among a region’s economic sectors on employment growth. However, the exact mechanisms through which knowledge spillovers between related sectors translate into employment growth are yet to be demonstrated. Entrepreneurship may be a possible transmission mechanism via which spillovers lead to the creation of new jobs. In this paper, we analyze novel pan-European regional survey data that distinguishes between opportunity- and necessity-driven entrepreneurs and we find that related variety has a positive effect on opportunity-driven entrepreneurship. In addition, we also find that different ‘varieties of capitalism’ influence regional entrepreneurship.