Olav Sorenson, Yale University
Olav Sorenson, Yale University
Community and Capital in Entrepreneurship and Economic Growth
Community and Capital in Entrepreneurship and Economic Growth
“Community and Capital in Entrepreneurship and Economic Growth”
Olav Sorenson (Yale) and Sampsa Samila (National University of Singapore)
We argue that social integration – in the sense of within-community interconnectedness – and venture capital have a complementary relationship in fostering innovation, entrepreneurship, and economic growth. Using panel data on metropolitan areas in the United States, from 1993 to 2002, our analyses reveal that social integration – in the microgeography of residential patterns by ethnicity – moderates the effect of venture capital, with more ethnically integrated regions benefitting more from expansions in the supply of venture capital. Our results remained robust to estimation with instrumental variables to address potential endogeneity in the availability of venture capital and in the level of social integration. We also provide further evidence of the underlying mechanisms by demonstrating that communities with higher levels of social integration foster the emergence of more ethnically diverse inventing and founding teams. Our findings support the idea that variation in social structure contributes importantly to community-level economic outcomes.