Tag Archives: agglomeration

From conception to birth: Opportunity perception and resource mobilization in entrepreneurship

Jesper B. Sørensen and Olav Sorenson

Studies consistently find regions dense in concentrations of similar firms to be fecund sources of new firms of the same kind. This pattern persists even in industries with negative returns to geographic concentration. Why do these patterns persist? On the one hand, social networks may constrain entrepreneurs’ opportunities, making it difficult to mobilize resources in more attractive locations. On the other hand, nascent entrepreneurs may systematically misperceive opportunities in such a way as to lead them to continue founding attempts in overcrowded regions. To distinguish between these two processes, we analyze a unique set of data on television stations that contains information on both attempts to start new stations, as well as successful foundings. Our exploratory analysis suggests that nascent entrepreneurs do consistently misinterpret information related to population dynamics. These patterns could easily contribute both to industrial agglomeration and to the fragility of Red Queen dynamics. We discuss the implications of these results for both future research and for public policy.

Advances in Strategic Management, 20 (2003): 89-117

The geography of opportunity: Spatial heterogeneity in founding rates and the performance of biotechnology firms

Toby E. Stuart and Olav Sorenson

One of the most commonly observed features of the organization of markets is that similar business enterprises cluster in physical space. In this paper, we develop an explanation for firm co-location in high-technology industries that draws upon a relational account of new venture creation. We argue that industries cluster because entrepreneurs find it difficult to leverage the social ties necessary to mobilize essential resources when they reside far from those resources. Therefore, opportunities for high tech entrepreneurship mirror the distribution of critical resources. The same factors that enable high tech entrepreneurship, however, do not necessary promote firm performance. In the empirical analyses, we investigate the effects of geographic proximity to established biotechnology firms, sources of biotechnology expertise (highly-skilled labor), and venture capitalists on the location-specific founding rates and performance of biotechnology firms. The paper finds that the local conditions that promote new venture creation differ from those that maximize the performance of recently established companies.

Research Policy, 32 (2003): 229-253

The social structure of entrepreneurial activity: Geographic concentration of footwear production in the U.S., 1940-1989

Olav Sorenson and Pino G. Audia

Nearly all industries exhibit geographic concentration. Most theories of the location of industry explain the persistence of these production centers as the result of economic efficiency. This article argues instead that heterogeneity in entrepreneurial opportunities, rather than differential performance, maintains geographic concentration. Entrepreneurs need exposure to existing organizations in the industry to acquire tacit knowledge, obtain important social ties, and build self-confidence. Thus, the current geographic distribution of production places important constraints on entrepreneurial activity. Due to these constraints, new foundings tend to reify the existing geographic distribution of production. Empirical evidence from the shoe industry supports this thesis.

American Journal of Sociology, 106 (2000): 424-462