Labour as a knowledge carrier: how increased mobility influences entrepreneurship

According to the knowledge-based spillover theory of entrepreneurship (KSTE), entrepreneurship is positively associated with the knowledge endowment level. An increase in knowledge expands the opportunity set, which is then exploited by heterogeneous entrepreneurs. The objective of this paper is to empirically test the validity of the KSTE by employing a detailed database comprising more than 19 million observations for the period 2001-2008 at the level of individuals, firms and regions in Sweden. Knowledge is claimed to be partly embodied in labour, implying that an increase in labour mobility can be expected to influence knowledge endowment at the regional level. Our dependent variable is an individual who has remained in a region throughout the time period considered. Controlling for a number of other variables, inter-regional labour inflows and intra-regional mobility levels are shown to exert a strong positive effect on entrepreneurship. This contrasts with inter-regional outflows, which negatively affect entrepreneurial entry. Another noteworthy result is that the probability of exploiting an increased knowledge stock through entrepreneurship increases by 15 % points if the individual has previous experience in starting a firm.