Agents of Structural Change: The Role of Firms and Entrepreneurs in Regional Diversification

Frank Neffke, Matté Hartog, Ron Boschma, Martin Henning

Research output: Contribution to journalArticlepeer-review


Who introduces structural change in regional economies: Entrepreneurs or existing firms? And do local or nonlocal establishment founders create most novelty in a region? We develop a theoretical framework that focuses on the roles different agents play in regional transformation. We then apply this framework, using Swedish matched employer–employee data, to determine how novel the activities of new establishments are to a region. Incumbents mainly reinforce a region’s current specialization: incumbent’s growth, decline, and industry switching further align them with the rest of the local economy. The unrelated diversification required for structural change mostly originates via new establishments, especially via those with nonlocal roots. Interestingly, although entrepreneurs often introduce novel activities to a local economy, when they do so, their ventures have higher failure rates compared to new subsidiaries of existing firms. Consequently, new subsidiaries manage to create longer-lasting change in regions.

Original languageEnglish
Pages (from-to)23-48
JournalEconomic Geography
Issue number1
Early online date2017 Dec 10
Publication statusPublished - 2018 Jan

Subject classification (UKÄ)

  • Economic Geography


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