UC Berkeley

Abstract: We propose that the geographic distribution of entrepreneurship evolves as developing communication systems alter the spatial scope of competition Our arguments imply that as spatial barriers to communication diminish founding events will be less sensitive to local context and more sensitive to distant competition. We test this argument with data on the first modern communication system, the US post office, and foundings of organizations that depended on it for distribution: magazine-publishing ventures. We find that as the postal system expanded, the spatial scope of competition among magazines increased: magazines in distant locations exerted more negative effects on local founding rates, whereas magazines in the focal location exerted less positive effects on local founding rates These findings reveal how spatial barriers to competition shape the geography of entrepreneurial activity.