Social Structure of Regional Entrepreneurship: The Impacts of Collective Action of Incumbents on De Novo Entrants

Abstract

The literature has posited that agglomeration economies and the formation of social relationships resulting from the geographic concentration of incumbents constitute the forces that “pull” new entrants into industry clusters. However, this proposition overlooks how the collective action of incumbents in pursuit of their own benefits affects new entrants. This study examines how business associations as collective action organizations established by incumbents to promote and safeguard group-wide interests contribute to de novo entrants. The empirical evidence from Canada’s telecommunication equipment manufacturing industry between 1995 and 2005 reveals that the prevalence of local business associations encourages de novo entrants. However, the impact is curvilinear such that excessive collective action on the part of local fellow incumbents can create a clubby environment and “push” new entrants away.