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ABSTRACT
Policymakers attempt to foster entrepreneurship within European regions yet firm interrelationships across European regions remain understudied. This paper analyses the extent to which past firm births and deaths influence future firm births and deaths across European NUTS 2 regions through the lens of competition, multiplier and Marshall effects. Using a novel multilevel mixed effects regression model, we find evidence for an immediate multiplier effect changing to a competition effect as time passes across European regions and countries. We also identify that significant variations in firm birth and death rates exist across European regions validating the importance of more decentralized regional entrepreneurial policies which has implications for policies like the European Regional Development Fund’s (ERDF) Cohesion Plan and the Smart Specialization Strategy.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 Data on the United Kingdom is included because the period for the study is 2008–2017 and the United Kingdom was a member of the European Union for this entire period.
2 The OECD (2017) also highlights this inconsistency in the availability of firm birth and death data across European countries. The unbalanced nature of the data is accounted for in our empirical modelling as detailed in Section 4.
3 Data cleaning measures include extracting business demography data from the Eurostat and OECD websites, merging the data together while creating regional codes and spatial scale codes to identify the areas to which the data pertains too.
4 These control variables include the natural log of GDP per inhabitant in region, a human capital variable and the percentage of industrial employment in region r, in country c, in period t.