Human capital, diversity, and new firm formation

Abstract

This paper analyses the role of human capital in determining regional variations in firm births. It is argued that both the level and heterogeneity of human capital are particularly important for services. This is confirmed by an empirical analysis of data for sub-regions of Great Britain from 2001 to 2007 utilising ordinary least-squares and maximum likelihood models incorporating spatial effects. Other variables found to impact on the creation of new service firms are related to labour market effects, agglomeration economies and competition; there are also significant differences in the impact of human capital between services and manufacturing.

Keywords:

• human capital
• diversity
• new firms