The knowledge spillover theory of entrepreneurship: an Asian perspective

For rapidly urbanizing countries in Asia, entrepreneurial activity is a critical source of employment and economic development. This paper uses a panel dataset of 20 countries in Asia to examine the role of urbanization in moderating the process of knowledge spillovers leading to firm creation. It is one of the pioneering studies to examine whether the knowledge spillover theory of entrepreneurship (KSTE)-a prominent and empirically valid theory in Western economies-is also valid in Asian economies. Empirical analysis reveals that the extent and quality of urbanization plays an important moderating role that can enhance or retard the exploitation of knowledge by urban entrepreneurs. The paper has important policy implications for Asian countries to take advantage of rapid urbanization and make investments in research and development to create knowledge spillovers that promote firm creation. Plain English Summary This study finds that a confluence of investment in research and development and the quality of urbanization in Asian countries boost firm creation. Moreover, employment in financial and business services helps in the creation and exchange of useful knowledge for entrepreneurial activities. This workforce acquires and generates knowledge to resolve challenges in business through interactions with multiple firms. It is important to understand the factors leading to a higher level of firm creation because the entry of new firms is one of the key sources of job creation and innovation. The principal implication of this study is that the countries should make investments in research and development and improve the quality and extent of urbanization to spur entrepreneurship.