Entrepreneurship

This article provides an overview of factors explaining regional variations in entrepreneurship. An overview of the definitions and measurement of entrepreneurship is given. The article distinguishes demand side and supply side explanations of regional variations in entrepreneurship. Important factors in the supply of entrepreneurship are industry structure, the population of organizations, and clusters in a region, providing a breeding ground for potential entrepreneurs. Another important factor in the supply of entrepreneurship is the regional culture, which explains the preference for entrepreneurship. A more ambiguous factor is unemployment: unemployment could make self-employment a relatively attractive option (necessity entrepreneurship), but unemployment could also decrease the demand for products of new firms and thus lower the demand for entrepreneurship. Other important factors in the demand for entrepreneurship are the expanding knowledge base of a region, which increases the number of technological inventions to be commercialized by new firms. Urbanization is likely to increase the demand for entrepreneurship, as it is generally correlated with an increasing diversification of demand. Finally, the relatively abundant supply of (venture) capital is likely to lower the barriers to develop a new business.