Quantifying entrepreneurship and its impact on local economic performance: A spatial assessment in rural Switzerland

Abstract

Regional and rural development policies in Europe increasingly emphasize entrepreneurship to mobilize the endogenous economic potential of rural territories. This study develops a concept to quantify entrepreneurship as place-dependent local potential to examine its impact on the local economic performance of rural territories in Switzerland. The short-to-medium-term impact of entrepreneurship on the economic performance of 1706 rural municipalities in Switzerland is assessed by applying three spatial random effects models. Results suggest a generally positive relationship between entrepreneurship and local development: rural municipalities with higher entrepreneurial potential generally show higher business tax revenues per capita and a lower share of social welfare cases among the population, although the impact on local employment is less clear. The explanatory power of entrepreneurship in all three models, however, was only moderate. This finding suggests that political expectations of fostering entrepreneurship to boost endogenous rural development in the short-to-medium term should be damped.

Intermediation for technology diffusion and user innovation in a developing rural economy: a social learning perspective

“…A limitation of this study is that it was not designed to undertake an evaluation of the impacts of the improvements reported in the local production system on the local economy, society and environment. Future research should consider measures of local economic, social and environmental performance, in order to obtain a more integrated view of the relationship between intervention outcomes and rural development at the local level (Baumgartner, Schulz and Seidl 2013). Given that prior research has indicated some adverse effects of interventions on local social capital (Phillipson, Gorton and Laschewski 2006;Atterton 2007), such an assessment should consider both positive and negative effects.…”

On the importance of forest assets for micro-firm performance

“…It may be a central constituent of adaptation strategies and policies aiming towards multifunctionality and pluriactivity as means for dealing with declining opportunities (Alsos et al 2003;Alsos & Carter 2006;Wilson 2010) and for generating endogenous development based on non-primary economic activities and new forms of rural livelihoods, sometimes argued to reflect a 'post-production' transition (Mather 2001;Elands & Praestholm 2008). In line with the premises of these policies, entrepreneurship has been found to be mostly positively associated with beneficial local development, as indicated by business tax revenues and the share of social welfare cases in rural communities (Baumgartner et al 2013). In the case of forest owners, their decision to start a firm may be spurred by, e.g., a wish to make use of their resources -land, buildings, game, road infrastructure etc.…”

“…4 However, the effect of entrepreneurship is not necessarily on a par with the level of expectations. In a study by Baumgartner et al (2013), the effect of local entrepreneurship potential on local development was found to be largely positive but modest. Also, in the short and medium term, structural differences between rural communities were found to exert a more substantial influence.…”

“…For instance, it may be the case that different types of places along an urban-rural continuum are favourable in different phases of firm development processes, e.g., start-up, growth and long-term survival (Renski 2009), or in terms of different aspects of business development (Fairlie & Robb 2009). As regards rural locations more specifically the disadvantages may include, e.g., constraints in terms of limited local demand, isolation from markets, or a lack of infrastructure and services (Renski 2009) or of skilled, specialized labour (Dinis 2006;Baumgartner et al 2013). The advantages may include lower costs (Renski 2009), for instance, and because firms in rural locations are more likely than urban firms to own their premises they often have better prerequisites with regard to financing (Keeble et al 1992;Blackburn & Curran 1993).…”

The effect of new business creation on employment growth in regions facing population decline

“…Although local economic performance is to a great extent determined by the local entrepreneurial potential and physical preconditions (Baumgartner et al 2013), the relationship between business creation and employment change is likely a two-way relationship: these factors influence each other. A strong economic performance by a region could increase that region's start-up rate since it implies a higher level of entrepreneurial opportunities.…”