Entrepreneurial Regions: Do Macro-Psychological Cultural Characteristics of Regions Help Solve the "Knowledge Paradox" of Economics?

Martin Obschonka,Michael Stuetzer,David B Audretsch,Jeff Potter,Michael E Lamb,Samuel D Gosling,Peter J Rentfrow,Lourens J Waldorp

doi:10.1371/journal.pone.0129332

Abstract

In recent years, modern economies have shifted away from being based on physical capital and towards being based on new knowledge (e.g., new ideas and inventions). Consequently, contemporary economic theorizing and key public policies have been based on the assumption that resources for generating knowledge (e.g., education, diversity of industries) are essential for regional economic vitality. However, policy makers and scholars have discovered that, contrary to expectations, the mere presence of, and investments in, new knowledge does not guarantee a high level of regional economic performance (e.g., high entrepreneurship rates). To date, this “knowledge paradox” has resisted resolution. We take an interdisciplinary perspective to offer a new explanation, hypothesizing that “hidden” regional culture differences serve as a crucial factor that is missing from conventional economic analyses and public policy strategies. Focusing on entrepreneurial activity, we hypothesize that the statistical relation between knowledge resources and entrepreneurial vitality (i.e., high entrepreneurship rates) in a region will depend on “hidden” regional differences in entrepreneurial culture. To capture such “hidden” regional differences, we derive measures of entrepreneurship-prone culture from two large personality datasets from the United States (N = 935,858) and Great Britain (N = 417,217). In both countries, the findings were consistent with the knowledge-culture-interaction hypothesis. A series of nine additional robustness checks underscored the robustness of these results. Naturally, these purely correlational findings cannot provide direct evidence for causal processes, but the results nonetheless yield a remarkably consistent and robust picture in the two countries. In doing so, the findings raise the idea of regional culture serving as a new causal candidate, potentially driving the knowledge paradox; such an explanation would be consistent with research on the psychological characteristics of entrepreneurs.

Highlights

Successful and highly performing local economies generally have one thing in common—strong and robust entrepreneurial activity [1, 2]
The dependent variable is the entrepreneurship rate as defined as the number of start-ups per 1,000 employees in a region
The places (MSAs and Local Authority Districts (LADs)) differ in their population sizes resulting in fewer individual observations from less populated regions in the personality datasets

Summary

Introduction

Successful and highly performing local economies generally have one thing in common—strong and robust entrepreneurial activity [1, 2]. Policy makers have “discovered” entrepreneurship—startup activity in the region—as a means for enhancing regional economic development. 1) explain, the success of entrepreneurial clusters in recent decades has challenged the traditional wisdom of smokestack chasing and many policy makers state that they want their regions to be the Silicon Valley. This has led to extensive efforts to seed local entrepreneurship, e.g.

Methods

Results

Conclusion