Entrepreneurship and network externalities

Research output: Contribution to journalArticlepeer-review

233 Scopus citations


Studies on agglomeration show that economic characteristics explain only a portion of variance in entrepreneurship rates across regions. To complement these studies, I argue that entrepreneurship tends to concentrate geographically, in part, because of the social environment. I suggest that, when making decisions, individuals follow social cues and are influenced by what others have chosen, especially when facing ambiguous situations. Such influence may be described as a non-pecuniary network externality. Using a non-linear path-dependent stochastic process, I build a model of entrepreneurial dynamics showing why communities with initially similar economic characteristics may end up with different levels of entrepreneurial activity.

Original languageEnglish (US)
Pages (from-to)1-27
Number of pages27
JournalJournal of Economic Behavior and Organization
Issue number1
StatePublished - May 2005
Externally publishedYes


  • Entrepreneurship
  • Network externalities
  • Path dependency

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management


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