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Entrepreneurship in peripheries: Where and how can peripheral regions benefit from social ties and social embeddedness of nascent entrepreneurs?

Research project As in many developed countries, Sweden is experiencing divergence in terms of socioeconomic development between prosperous metropolitan regions and declining peripheries. Although entrepreneurship often is suggested as a tool to reignite dynamism on lagging-behind regions, the exact mechanisms how this can lead to economic renewal and sustainable rural development is still missing.

The aim of this project is to scrutinize whether, and in such case how, entrepreneurial activities can be translated to regional development outside the largest urban regions. While there is a growing evidence of the role of social ties for formation and development of new firms, especially in peripheral regions, the missing piece of the puzzle is how diverse is their importance from a regional and individual perspective. We will particularly focus on differences between local and non-local entrepreneurs in terms of igniting regional diversification and employment.

Head of project

Project overview

Project period:

2020-01-01 2022-12-31

Participating departments and units at Umeå University

Department of Geography

Research area

Human geography

External funding

Formas

Project description

As elsewhere in Europe (European Parliament 2007), Sweden has seen increasing divergence in terms of socioeconomic development between the relatively prosperous metropolitan regions and the more peripheral and sparsely populated regions. This has raised widespread concerns across the political spectrum, calling for more active regional policies to stall the increasingly unequal economic opportunities met and experienced first-hand by an increasing share of the population (Rodriguez-Pose 2018). Despite some promising exceptions of stalled population decline, not much is indicating that this negative course of direction is changing in sparsely populated and peripheral regions.

While relatively sparse population together with high economic specialization (i.e., reliance on only a few industries and/or firms) make Swedish peripheral regions particularly vulnerable to economic restructuring (Eriksson and Hane-Weijman 2017), there are mechanisms that can be mobilized to counteract this unfavorable trend. For example, while many municipalities which are considered as vulnerable (sårbara) by the Swedish Agency for Economic and Regional Growth (Tillväxtverket 2016), are located in peripheral regions, some municipalities managed to significantly improve their economic conditions by diversifying their economic activities. Since diversification is a key mechanism through which the resilience of regional economies is enhanced, this should also be a central policy challenge (Boschma 2017). While previous aggregate studies have shown that regional diversification mainly is driven by new firms that either are new start-ups or relocate to the region (Neffke et al 2018), the underlying mechanisms are however still largely unknown.

Important questions are whether it is local or non-local entrepreneurs that contribute to regional change, and what type of entrepreneurial attributes that are important? Previous studies on regional embeddedness provide inconclusive answers. It is argued that local entrepreneurs have a home-advantage through access to local networks, information or locally recognizable credibility that takes time to accumulate (Dahl and Sorenson, 2012). But it is also argued that locals are less prone to engage in new opportunities and hence less willing to become “agents of change” (Akgün et al 2011). This is because non-local entrepreneurs are more likely to introduce activities present in their home regions into the industrial structure of the new region. The role of migrant entrepreneurs (i.e. individuals who were economically active in another region prior to starting the company) is therefore likely to be of particular importance. This notion is reflected in much of the reports on entrepreneurial efforts in peripheral regions as non-local entrepreneurs usually gain attention in the local media, while their long-term regional imprint unfortunately tend to be low. Analyzing the survival of all tourism-related start-ups in the four northernmost counties in Sweden, Brouder and Eriksson (2013) show that none of the non-local entrepreneurs were still active after four years. To better understand the potential relationship between entrepreneurship and regional development, we therefore need a more periphery-focused investigation of start-up activities (Westlund et al 2014).

The aim of this project is to scrutinize whether, and in such case how, entrepreneurial activities can be translated to regional development outside the largest urban regions.While there is a growing evidence of the role of social ties for formation and development of new companies (Parker 2018), especially in peripheral regions (Eriksson and Rataj 2019), the missing piece of the puzzle is how diverse is their importance from a regional and individual perspective.

The project aim will be fulfilled by a detailed investigation of what type of social ties that are important for different types of entrepreneurs when explaining the location of their start-up and their impact on regional diversification and employment. By means of longitudinal matched employer-employee data containing relational information on all firms and individuals in Sweden, this will be done by answering the following research questions:

1: What type of social ties (regional attachment as well as co-worker and family ties) influence the performance (survival and employment) of new companies?

2: To what extent does social ties influence potential decisions of relatively successful companies to reallocate from peripheral into metropolitan regions?

3: How is the potential for regional diversification influenced by the entrepreneurs’ different type of attachment to the regional economy?

External funding