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Small Business Economics

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01-03-2015

Entrepreneurship across time and space: empirical evidence from Korea

Authors: Eunsuk Hong, In Hyeock Lee, Laixiang Sun, Richard Harrison

Published in: Small Business Economics | Issue 3/2015

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Abstract

This paper investigates the temporal and spatial dynamics of business start-up activities and their determinants. It integrates three perspectives in explaining regional variations in start-ups: (1) spatial heterogeneity that characterizes regional differences in promoting or conditioning start-up activities, (2) temporal dependence that features a self-augmenting and self-reinforcing effect of start-up activities, and (3) spatial dependence that portrays inter-regional interaction of start-up activities across proximate regions. A spatial dynamic panel modeling analysis of the determinants of new manufacturing ventures created in subnational regions of South Korea confirms that, in addition to the importance of regional characteristics, both temporal and spatial dependences of start-up activities are simultaneously in force and play statistically significant roles. To address the joint endogeneity issue of temporal and spatial dependences, we employ the system GMM estimator, which leads to much improved explanation of inter-regional variations in firm creation activities.

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The adoption of adding one to the count variable, which keeps observations with zero number of new firms after taking logarithm, is popular in the literature (e.g., Head et al. 1995; Maitland et al. 2005).

We chose 2000–2004 for the following reasons. First, Korea suffered from a severe financial crisis between late 1997 and early 1999. Economic activities before 2000, including the creation and location decisions of new ventures, would have been distorted due to the crisis. Second, the government amended the Korean Standard Industrial Classification (Korean SIC) Code in January 2000. To ensure the consistency of the types of industries to be included in our sample, we opt to use the data from 2000 onwards. Third, 2004 is the most recent year of the data to which we have access.

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Title: Entrepreneurship across time and space: empirical evidence from Korea
Authors: Eunsuk Hong
In Hyeock Lee
Laixiang Sun
Richard Harrison
Publication date: 01-03-2015
Publisher: Springer US
Published in: Small Business Economics / Issue 3/2015
Print ISSN: 0921-898X
Electronic ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-014-9613-1

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