A spatial analysis of new business formation: Replicative vs innovative behaviour

Using spatial econometric tools, the paper examines the spatial structure of new business formation of Italian regions during the period 2004–2007. In particular, the study empirically investigates whether new business formation in a given geographical area may be explained in terms of replicative and/or innovative entrepreneurial behaviour in each area as well as in the neighbouring areas. Additionally, the analysis focuses on the influence of urbanization on the birth of new firms. From the estimation of a Spatial Durbin Model, we find a significant degree of spatial dependence among Italian regions not only in new business formation but also in some of its determinants. We also find that new business formation in Italy can be explained in terms of both replicative and innovative entrepreneurial behaviour, whose effects depend strictly on the degree of urbanization. Specifically, the replicative behaviour of new firms seems to be significantly dependent on the degree of urbanization, i.e. we find positive effects only when regions are lowly urbanized. A similar result is not found for the innovative behaviour, which positively influences new business formation independently on the degree of urbanization. However, when regions are lowly urbanized, some obstacles to new business of innovative nature can be observed.