Why Butterflies Don't Leave.Locational behavior of entrepreneurial firms*

Entrepreneurship is an important process in regional economic development.Especially the continued growth of a minority of new firms is of major significance to thecommercialization of new ideas and employment growth. These growing new firms aretransforming on a structural basis, like caterpillars turning into butterflies. However, likebutterflies they are at risk to leave their region of origin for better places. This paper analyseshow and why the spatial organization of firms develops subsequent to their start-up. A newconceptual framework and an empirical study of the life course of entrepreneurial firms are usedto construct a theory on their locational behavior that explains that behavior as the outcome of aprocess of initiatives taken by entrepreneurs, enabled and constrained by resources, capabilitiesand relations with stakeholders within and outside of the firm. This study shows thatentrepreneurs decide whether or not to move their firm outside of their region of origin fordifferent reasons in distinct phases of the firm life course. Being embedded in social networks,for example, is an important constraint on locational behavior during the early life course of afirm, but over time this becomes less important and other mechanisms like sunk costsincreasingly determine the locational behavior of fast-growing firms. The development of thespatial organization is also of major importance: when a multilocational spatial organization hasbeen realized, it is much easier to move the headquarters to another region. The spatialorganization of entrepreneurial firms co-evolves with the accumulation of their capabilities. Adevelopmental approach incorporating evolutionary mechanisms and recognizing human agencyprovides new insights into the age-old study of firm location...