The effect of knowledge spillovers on regional new firm formation: The Greek manufacturing case

Abstract

This research examines the effect of knowledge spillovers on new firm formation across Greek regions in manufacturing over the period 2002–2010. The econometric analysis results reveal that knowledge spillovers, as proxied by innovation and high-tech labor measures, positively affect regional new firm formation rates. Intra-sectoral spillovers, as captured by geographic sectoral specialization and industrial intensity, also positively affect regional new firm formation. In contrast, inter-sectoral spillovers, as proxied by regional industrial diversity, reduce new firm formation across regions. The examination of other control variables suggests that GDP growth and small firms stimulate regional new firm formation, whereas sunk costs and unemployment have a discouraging effect.