Knowledge spillovers of failure and innovation in entrepreneurship

Abstract

Entrepreneurs do not only learn from their own experience but also learn from each other. Accordingly, the role of knowledge spillovers in translating failure of some companies into successes of others needs more understanding. The motivation of this research is to explain the consequences of knowledge spillovers in case of failure or innovative success on the number of entrepreneurs located in the same geographical region. This paper presents the impact of failure and innovativeness on the size of an entrepreneurial cluster in a location. French departmental data used was provided by the INSEE from 2006 to 2014. Using a fixed-effect regression of year and department code, results described a positive relationship between the number of entrepreneurs in a region and the number of failed firms, as well as a moderating role of unemployment on the impact of failure. Evidence suggests that entrepreneurs can obtain positive spillovers of knowledge entrepreneurs can get from failure. The experience and knowledge entrepreneurs accumulate from failure. Further work should focus understanding the mechanisms behind the positivity effect of failure's spillovers in entrepreneurship.