The knowledge spillover theory of entrepreneurship: the developing country context
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The knowledge spillover theory of entrepreneurship: the developing country context Muhammad Naveed Iftikhar 1 & Maha Ahmad 2 & David B. Audretsch 3 # Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract This is among the few studies to test the Knowledge Spillover Theory of Entrepreneurship (KSTE) at the city level in a developing country i.e. Pakistan. KSTE is in its empirical infancy; while the theory has been lauded for its advancement of microeconomic foundations in endogenous growth theory, there is scant literature on just how well KSTE holds when tested empirically outside the developed world. This study uses a novel dataset to measure knowledge stock and spillovers in ten major cities across Pakistan to answer the question: What is the role of knowledge spillover in the creation of business firms in cities of a developing country? The study provides valuable insights into the factors that lead to higher levels of firm creation through panel data analysis of ten cities of Pakistan during 2002–2014, and also contributes to captivating the global appeal for KSTE by testing the theory empirically in a developing country. Keywords Entrepreneurship . Knowledge spillovers . Economic growth . Cities .
Urbanization
1.Introduction Welter et al. (2019) and Welter et al. (2017) have recently argued that entrepreneurship is context specific. Some theories and empirical findings for entrepreneurship may hold for some national and institutional contexts, but not for others. The Knowledge Spillover Theory of Entrepreneurship (KSTE) explains firm creation and the growth process mostly in the context of developed countries, especially Europe and North America. However, there is a dearth of empirical attention given to KSTE in the context
* Muhammad Naveed Iftikhar [email protected]
1
University of Delaware, Newark, DE, USA
2
National University of Science and Technology, Islamabad, Pakistan
3
Indiana University, Bloomington, IN, USA
International Entrepreneurship and Management Journal
of developing countries and their cities. Developing countries are generally involved in low knowledge-intensive entrepreneurship which poses some limitations in extending KSTE to the developing country context. This paper attempts to empirically test the KSTE in ten cities of Pakistan using a panel data set from 2002 to 2014. It provides insight to the question: What is the role of knowledge spillover in the creation of business firms in cities of Asia. The importance of this question has also been highlighted by Acs and Varga (2002) as follows: “Why and when does economic activity become concentrated in a few regions, leaving others relatively underdeveloped?” Audretsch and Lehmann (2005) pointed out how focus has shifted towards regions for understanding the concentration of entrepreneurship and innovation. Pakistan is currently one of the world’s most rapidly urbanizing countries with an annual urbanization rate of 3%. This rapid urbanization can either become a source of economic growth and entrepreneursh
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