Entrepreneurship and regional economic development: evidence on Turkish regions

Demirdağ, İsmail
After the 1970s crisis, economies of scale lost its importance and large firms faced with serious economic difficulties. Globalization and advancements in information and communication technology (ICT), which considerably reduced the transaction cost of information and capital, led the competitive advantage to move from large establishments to smaller and more innovative firms. Since the mid-1970s, share of small and innovative firms has begun to increase in almost all industries and in the economy as a whole. Especially, with the seminal work of Birch (1987) pointed out that small and medium sized enterprises are important vehicles for creating new jobs, the interest on SMEs and entrepreneurship has begun to gradually raise. Meanwhile, increasing evidence on the positive contribution of entrepreneurship on regional economic development and growth has led researchers and policy makers to pay a special attention to the links between entrepreneurship and economic development process. In that sense, in recent decades, entrepreneurship has been new phenomena in regional science and economic development theories as well as in various different policy documents. The mainstream of the entrepreneurship literature point out that entrepreneurship play a key role in the generation of new jobs, creation of employment, innovations, and dissemination of new knowledge that ultimately lead to economic development and growth. The main objective of this thesis is to investigate the relationship between entrepreneurship and regional economic development and growth in the context of NUTS II regions of Turkey for the periods of 1990, 2000, and 2011. Based on this objective and the recent regional economic development models, the study firstly examines the contribution of entrepreneurship on regional economic development and growth. Secondly, the thesis investigates the reasons behind the diverse impacts of entrepreneurship on regional economic development. In that sense, the study examines the relationship between the level of regional entrepreneurial activity, represented as firm birth rates and self-employment rate, and the stages of regional economic development. Lastly, the thesis investigates the effects of the certain regional characteristics on regional entrepreneurial activity. For the empirical analysis, two analyses are used: multiple regression analysis and one-way ANOVA. The results of the study on the contribution of entrepreneurship on economic development and growth indicate that firm births and self-employment are positively related to the economic development and growth of NUTS II regions of Turkey. However, it is observed that firm birth rate has more pronounced impact on economic development and growth than self-employment rate. In addition, firm death is found to negatively associate with economic development and growth. Furthermore, the empirical findings on the relationship between the level of entrepreneurship and the stages of economic development demonstrate that there is a U-shaped relationship between firm birth rate and regional economic development level. However, the findings also show that there is an inverse U-shaped relationship between self-employment rate and the level of regional economic development. The thesis also contributes to the knowledge about the impacts of regional economic, demographic, institutional, and cultural factors on the regional entrepreneurial activity. The results support the arguments that regional characteristics have substantial effects on regional entrepreneurial activity.


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Citation Formats
İ. Demirdağ, “Entrepreneurship and regional economic development: evidence on Turkish regions,” M.S. - Master of Science, Middle East Technical University, 2015.