A multilevel approach to firm interrelationships across European regions

Abstract

Policymakers attempt to foster entrepreneurship within European regions yet firm interrelationships across European regions remain understudied. This paper analyses the extent to which past firm births and deaths influence future firm births and deaths across European NUTS 2 regions through the lens of competition, multiplier and Marshall effects. Using a novel multilevel mixed effects regression model, we find evidence for an immediate multiplier effect changing to a competition effect as time passes across European regions and countries. We also identify that significant variations in firm birth and death rates exist across European regions validating the importance of more decentralized regional entrepreneurial policies which has implications for policies like the European Regional Development Fund’s (ERDF) Cohesion Plan and the Smart Specialization Strategy.