Metros with a strong creative class are also more likely to have robust business growth.
Entrepreneurship may be connected to a region's underlying creativity, especially in arts and media, a new study finds.
The study, by Martin Prosperity Institute colleague Kevin Stolarick, José Lobo of Arizona State University, and Deborah Strumsky of the University of North Carolina at Charlotte, examines the possible connection between the creative class and levels of entrepreneurial business formation across metro regions.
To measure entrepreneurship, the study uses the National Establishment Times Series, which covers roughly 37 million records for American establishments between 1990 and 2008. NETS identifies everything from the “birth and death of establishments, and the change in employment associated with establishments’ births and deaths, the expansion and contraction of existing establishments, and the movement of establishments in and out of an area.” In other words, the ups and downs of businesses.
The researchers use this data to examine how a metro’s creative workforce affects its levels of entrepreneurial business formation and growth. They analyze the data for the creative class as a whole as well as the key occupations that comprise it: computer and math, architecture and engineering, management, business and finance, law, healthcare, education, and arts, design, media and entertainment.
Their statistical analysis takes factors like a region’s past growth into consideration, and controls for systematic location-specific characteristics. Their study generates several key findings.
First, it finds a close connection between the creative class and entrepreneurship.
The size of the creative class is "positively and significantly associated with the total of establishment growth in a region, the number of new opened establishments and the expansion of existing establishments," they find. Furthermore, they write that “regions of all sizes primarily experience growth through the creation of new establishments, and that growth is always, significantly, and positively associated with regional creative employment.”
Second, it finds that certain occupations are more important than others when it comes to entrepreneurship. Two in particular are closely related to entrepreneurship at the regional level — management and arts, design, media and entertainment. Indeed, they find that arts, design, media and entertainment occupations are “pretty consistently and strongly related to regional entrepreneurship levels.” Rather than being a product of economic development, as some contend, the study finds that arts, design, media and entertainment function “can be a driver of creativity and entrepreneurship across a region."
Third, it finds that current levels of entrepreneurship in metros is strongly influenced to past levels — in short that entrepreneurship is "path-dependent."
[P]rior entrepreneurship is strongly related with current entrepreneurship ... Developing success with entrepreneurship is likely to be a challenging undertaking. Established regional trajectories are difficult to shift, and historical performance or lack thereof will greatly influence future results. Success will not come ‘overnight,’ and long-term planning and execution will be required.
The bottom line:
The evidence indicates that one type of creativity is indeed associated with another, namely, the formation of new businesses. Taking past growth into consideration, and allowing for annual fixed effects to account for economic cycles as well as controlling for systematic location-specific characteristics, we find that the larger the creative employment of a region, the higher the levels of entrepreneurship and regional growth.