nep-geo New Economics Papers
on Economic Geography
Issue of 2005‒09‒02
two papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Divide and Conquer? Decentralisation, Co-ordination and Cluster Survival By Kirsten Wolter
  2. WHY SO MANY LOCAL ENTREPRENEURS? By Claudio Michelacci; Olmo Silva

  1. By: Kirsten Wolter
    Abstract: This paper develops a simulation model of the behaviour of clusters in the face of bifurcation events in their environment. Bifurcations are understood as the regional equivalent to Schumpeterian creative destruction. The model investigates the role of decentralisation and co-ordination for the likelihood of successful adaptation by comparing adaptive performance of clusters exhibiting different degrees of decentralisation and alternative modes of co-ordination. Using Kauffman’s (1993) N/K model, it is found that there is an optimum degree of decentralisation with respect to cluster adaptability while different co-ordination mechanisms face a trade-off between speed and cluster-level optimality of results. In doing so, the model sheds light on an empirical controversy regarding the role of both factors for adaptation that has emerged between the Silicon Valley – Boston 128 comparison on the one and the Italian Industrial District experience on the other hand. Moreover, the identification of the roles played by decentralisation and co-ordination for cluster adaptability in changing environments could serve as guidance for future empirical research as well as policy initiatives.
    Keywords: Cluster; Bifurcations; N/K model
    JEL: R11 R12
    Date: 2005
  2. By: Claudio Michelacci; Olmo Silva (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: We document that the fraction of entrepreneurs who work in the region where they were born is significantly higher than the corresponding fraction for dependent workers. This difference is more pronounced in more developed regions and positively related to the degree of local financial development. Frims created by locals are more valuable and bigger (in terms of capital and employment), operate with more capital intensive technologies, and are able to obtain greater financing per unit of capital invested, than firms created by non-locals. This evidence suggests that there are so many local entrepreneurs because locals can better exploit the financial opportunities available in the region where they were born. This can help explaining how local financial development cause presistent disparities in entrepreneurial activity, technology, and income.
    Keywords: Entreprenurship, economic and financial development, social capital.
    JEL: J23 O12 O16 Z13
    Date: 2005–05

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