Entrepreneurs and Job Growth: Probing the Boundaries of Time and Space

Abstract

Although scholars have long emphasized the importance of entrepreneurs to long-term growth prospects, entrepreneurship often receives less attention by policy makers than traditional industrial recruitment efforts as regional growth engines. The effects of entrepreneurship may be more subtle than the latter approaches, but business creation can have significant effects across both space and time. This article first sketches the important relationship between innovation, entrepreneurship, and growth and then empirically assesses the relationship between entrepreneurship and job growth across U.S. labor market areas and counties. Three key findings emerge. First, entrepreneurship is systematically related to job growth; furthermore, this relationship increases in intensity over time. Second, entrepreneurship has the greatest impact on the county in which it occurs but also generates positive spillovers for job growth in neighboring counties. Finally, the impact of entrepreneurship is greater in denser, more urbanized settings where such businesses can leverage the advantages of a thick marketplace.