What Makes a City Entrepreneurial?

February 22, 2010
Edward L. Glaeser (Glimp Professor of Economics, Harvard University) and William R. Kerr (Assistant Professor, Harvard Business School)

This Policy Brief is based on "Clusters of Entrepreneurship," an article by Edward L. Glaeser, William R. Kerr, and Giacomo A.M. Ponzetto that appeared in the January 2010 issue of the Journal of Urban Economics, and "Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?" an article by Edward L. Glaeser and William R. Kerr that appeared in the September 2009 issue of the Journal of Economics & Management Strategy.

Why are some metropolitan areas so much more entrepreneurial than others? High levels of entrepreneurship are closely correlated with regional economic growth. Places with abundant new start-ups also experience faster income and employment growth. Areas with more small, independent firms far in the past have tended to do better. Unsurprisingly, local policy makers who are looking for ways to rev the economic engines of their cities are interested in policies that can generate more entrepreneurship. Therefore, understanding the determinants of entrepreneurship can help guide the development of more effective economic development policies, both locally and nationally.