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Whereas initially physical capital and later, knowledge capital were viewed as crucial for growth, more recently a very different factor, entrepreneurship capital, has emerged as a dri-ving force of economic growth. In this paper, we define a region’s capacity to create new firms start-ups as the region’s entrepreneurship capital. We then investigate the local embedded-ness of this variable and which variables have an impact on this variable. Using data for Ger-many, we find that knowledge-based entrepreneurship capital is driven by local levels of knowledge creation and the acceptance of new ideas, indicating that local knowledge flows play an important role. Low-tech entrepreneurship capital is rather increased by regional un-employment and driven by direct incentives such as subsidies. All three measures are locally clustered, indicating that indeed, entrepreneurship capital is a phenomenon that is driven by local culture, and is therefore locally bounded.

The paper analyses the impact of venture capital finance on growth and innovation activities of young German firms. Among other variables, our panel of firm data includes data on venture capital funding and patent applications. With statistical matching procedures we draw an adequate control group of non­venture funded but otherwise comparable firms. The analysis confirms other findings that venture funded firms in Germany have higher number of patent applications than those in the control group. However, they do so already before the venture capitalists engagement. After this engagement, the number of patent applications does not differ significantly from that of the control group, however the venture funded firms display significantly larger growthrates. We conclude that the higher innovation output of venture funded firms is mainly driven by the selection process made by the venture capitalist.

The literature focusing on the geography of entrepreneurship has developed some-thing of a schizophrenic approach. On the one hand is a series of studies, which have tried to identify characteristics specific to particular regions that account for inter-spatial variations in entrepreneurship. On the other hand is a literature that has ex-amined the impact of entrepreneurship on the economic performance of that region. While the emergence of a statistical link between economic performance and entre-preneurial activity is of considerable interest to both scholars and policy makers alike, it considers the amount of entrepreneurial activity specific to a region as an exogenous endowment. Thus, little guidance is provided as to how policy could ac-tually influence economic performance by generating more entrepreneurial activity. The purpose of this paper is explicitly link these two disparate literatures by suggest-ing that entrepreneurial activity is not exogenous, as this second strand of literature implies, but rather, as the earlier studies indicated, shaped by a number of factors specific to the particular location. Moreover, if entrepreneurship capital cannot be assumed to be exogenous, a single equation estimation would lead to biased results. We therefore estimate both equations simultaneously using three stage least square estimation. The empirical evidence suggests that the degree of spatially specific entrepreneur-ship capital is shaped by regional-specific factors reflecting both entrepreneurial op-portunities and the entrepreneurial capabilities. In turn, the extent of entrepreneur-ship capital has a positive impact on regional economic performance.

The literature focusing on the geography of entrepreneurship has developed something of a schizophrenic approach. On the one hand is a series of studies, which have tried to identify characteristics specific to particular regions that account for inter-spatial variations in entrepreneurship. On the other hand is a literature that has examined the impact of entrepreneurship on the economic performance of that region. While the emergence of a statistical link between economic performance and entrepreneurial activity is of considerable interest to both scholars and policy makers alike, it considers the amount of entrepreneurial activity specific to a region as an exogenous endowment. Thus, little guidance is provided as to how policy could actually influence economic performance by generating more entrepreneurial activity. The purpose of this paper is to explicitly link these two disparate literatures by suggesting that entrepreneurial activity is not exogenous, as this second strand of literature implies, but rather, as the earlier studies indicated, shaped by a number of factors specific to the particular location. Moreover, if entrepreneurship capital cannot be assumed to be exogenous, a single equation estimation would lead to biased results. We therefore estimate both equations simultaneously using three stage least square estimation. The empirical evidence suggests that the degree of spatially specific entrepreneurship capital is shaped by regional-specific factors reflecting both entrepreneurial opportunities and the entrepreneurial capabilities. In turn, the extent of entrepreneurship capital has a positive impact on regional economic performance.

Based on a sample of German inno innovating firms that contains information on formal and informal innovation cooperation between customers and suppliers, we state that firms perceive informal cooperation as being more important than formal cooperation modes. We then investigate the determinants of firms decisions to engage into the respective cooperation modes. In line with previous empirical work, we do not find much empirical evidence for the relevance of incoming spillovers. In addition, our results suggest that this finding holds as well for informal cooperations. A firms ability to protect its proprietary innovations, however, seems to be a key determinant of formal as well as informal cooperations. Furthermore absorptive capacity and the organizational structure of in-house R&D play an important role. Another relevant driver of vertical cooperations are the innovation dynamics at the he industry level. Firms who operate an R&D department and firms who are involved in costly R&D projects tend to cooperate formally rather than informally.

The paper analyses the impact of venture capital finance on growth and innovation activities of young German firms. Among other variables, our panel of firm data includes data on venture capital funding and patent applications. With a statistical matching procedure we draw an adequate control group of non venture funded firms. The analysis gives evidence that innovative firms will be able to close a venture capital deal with higher probability. Once the firms are venture funded, they display higher growth rates but do not differ in their innovative output from otherwise comparable firms. We derive strategic implications.

The neoclassical model of the production function, as applied by Robert Solow to build the neoclassical model of growth, linked labor and capital to output. More recently, Romer and others have expanded the model to include measures of knowledge capital. In this paper we introduce a new factor, entrepreneurship capital, and link it to output in the context of a production function model. This paper explains what is meant by entrepre-neurship capital and why it should influence economic output. A production function model including several different measures of entrepreneurship capital is then estimated for German regions. The results indicate that entrepreneurship capital is a significant and important factor shaping output and productivity. These results sug-gest a new direction for policy that focuses on instruments to enhance entrepreneurship capital.