The knowledge spillover theory of entrepreneurship: the developing country context

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.