Knowledge diversity and entrepreneurship following an economic crisis: an empirical study of regional resilience in Great Britain

Abstract

ABSTRACTThis article argues that the ability of entrepreneurs to facilitate regional adaptation to economic crises is mediated by the size and diversity of local knowledge stocks. The specific research question addressed is the hypothesis that, in the aftermath of a crisis, the birth rate of new firms will recover more rapidly in regions with a strong and diverse knowledge stock. It is theorised that unrelated knowledge diversity is of particular importance in stimulating new entrepreneurial opportunities and structural change, whilst the incentive to exploit opportunities differs according to region-specific factors. In addition to this theoretical contribution, the article develops spatial econometric models to test these research hypotheses using data on sub-regions of Great Britain for 2004–2014. The results support the central theoretical hypotheses and emphasise the positive significance of unrelated knowledge diversity and employment in knowledge intensive services to regional recovery from an economic shock. A key implication for policy-makers wishing to facilitate regional adaptation to crises is that it is important to focus on fostering entrepreneurship by developing a region’s stock of knowledge intensive services and the diversity of the knowledge creating sector, rather than relying on specialised clusters of firms.