Abstract

Our understanding of the role of entrepreneurship in economic growth is severely limited due to unavailability of the conventional production functions to take entrepreneurship explicitly into account (Leibenstein, 1968; Audretsch and Keilbach, 2004). Recognizing organization as a primary entrepreneurial function (Harbison, 1956), this paper presents a model of entrepreneurship and growth in a spatial setting in which entrepreneurs organize factors of production, including human capital, physical capital, and technology through location choice and firm structure. Our spatial model is motivated by the observations that both location and internal structure account for the performance and productivity of firms (Webber, 1929; Chandler, 1962), and that firm location and organization are closely related to agglomeration economies and diseconomies (Nove, 1969; Wood and Parr, 2005). Therefore, the growth and survival of a firm may depend upon the way its owner the entrepreneur exploits the tradeoff between agglomeration economies and agglomeration diseconomies.

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