Here comes the entrepreneur? A Discrete Choice Experiment on the location decision of early-stage entrepreneurs.

Abstract

Policies around the world aim to strengthen their entrepreneurial ecosystem to attract entrepreneurs. However, current literature contains contradictory findings regarding reasons for entrepreneurs to either leave or stay in a region. To entangle this apparent contradiction, this research studies the location decision of early-stage entrepreneurs by studying their preferences for both economic and individual regional attributes. Insights in preferences are obtained by using a Discrete Choice Experiment (DCE) among 935 respondents in ten countries in North America and Western Europe, which results in a total of 14,960 observations. This method allows for showing a causal relation between regional attributes and the location decision of early-stage entrepreneurs. Moreover, this approach enables to observe differences and similarities in choice patterns of the entrepreneurs (i.e. unobserved heterogeneity). Entrepreneurs that show similar choice patterns are allocated to the same class. Covariates are used to characterize the different classes. The results show that a three class model best describes the data. Classes can roughly be differentiated on the extent to which the entrepreneurs are willing to leave their home region to obtain access to economic attributes as a benefit for their start-up. Entrepreneurs in the first class are mostly influenced by the distance to loved ones, and thus likely to stay in their home region. The second class of entrepreneurs shows a relatively equal influence of both economic and individual attributes. Most influential are access to market, availability of capital, quality of living and distance to loved ones. Entrepreneurs in the third class are mainly influenced by economic attributes, especially by access to market, availability of capital and skills of workforce. By researching heterogeneity, this study connects the embedded entrepreneur of Dahl & Sorenson (2009) and Stam (2007) and Florida’s (2004) creative class. The insights in heterogeneity solve the apparent contradiction between these different research findings. Moreover, the concept of Florida’s creative class is argued to be broadened by including economic attributes derived from the entrepreneurial ecosystems literature. Lastly, the insights into the individual perspective and individual needs of the entrepreneur add valuable information to entrepreneurial ecosystems literature (Spigel, 2015).