Knowledge Spillover and Innovative Entrepreneurship in Urban Areas

In response to a widely confirmed notion that entrepreneurship plays substantial role in economic growth and that it varies across environments, literature analyzing the conditions that may stimulate it is growing extensively. By reviewing existing literature, this thesis employs qualitative approach to investigate the unexplained role of knowledge spillover in making urban areas in the U.S. a favorable environment for entrepreneurship, as indicated by higher start-up rate. The main proposition is that in urban areas, knowledge spillover stimulates regional innovativeness and further stimulates entrepreneurial activity. Aside from explaining basic concepts and notions regarding the case, this thesis bridges established relationships to construct a framework that may explain the process. Indeed, there are evidences supporting the idea that urban areas exhibit knowledge spillover, which makes them more innovative than elsewhere (rural areas and areas of specialization). High-density and diversity, two main distinctive natures of urban areas, are proven to promote this phenomenon. When extended, we find evidences proving that regions with higher innovativeness are more likely to yield higher entrepreneurial establishments. Considering that the scale of impact increases by metropolitan size and that it is more prevalent among service industries, it strengthens the presumption that the tendency for entrepreneurs to create new businesses in innovative areas is more of a large urban area phenomenon. Compiled into a chain of relationships, those empirical findings serve a justification to the proposition. This thesis is expected to be able to provide a strong base in helping policy efforts that aim at enhanced entrepreneurship and overall improvement of the economy.