1 Economic Entrepreneurship, Startups and Their Effects on Local Development: The Case of Sweden*

The current empirical entrepreneurship literature mainly shows a positive correlation between entrepreneurship (measured as the number of startups) and economic growth. However, the mechanisms by which entrepreneurship exerts its positive influence are not obvious. This paper studies the connections between startups and local development at the municipal level in Sweden 2000-2008. We use a unique database including not only total startups, but data on startups divided in six branches to study the impact of entrepreneurship on population and employment growth. Analyses are performed on all municipalities as well as by municipality type and by growth rate. In contrast to previous research, our results indicate that for several branch groups startup effects on growth may be more pronounced in low density areas than in urban agglomerations. This paper also contains one of the first empirical attempts to investigate the influence of local norms, values, networks and other spacebound assets on entrepreneurship propensity. We find that this “local Entrepreneurial Social Capital” (ESC) is highly correlated with startup frequency in Swedish municipalities