Do Regions with Entrepreneurial Neighbours Perform Better? A Spatial Econometric Approach for German Regions

Abstract

A Neoclassical production function is used to analyse the effects of knowledge spillovers via entrepreneurship on economic performance of 337 German districts. To take the spatial dependence structure of the data into account, a spatial Durbin model was estimated. The importance of the choice of the appropriate weight matrix is highlighted. Positive knowledge spillover effects via entrepreneurship and competitiveness - improving the effects of entrepreneurship capital within a certain region as well as between regions - are found. However, the significance of thespatial spillover effects largely depends on the choice of the weight matrix. This is seen as evidence that positive and negative spatial spillover effects of entrepreneurship capital cancel out.