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Diversity, Entrepreneurship, and the Urban Environment

ABSTRACT: In recent years, the field of regional economic analysis has focused on the social and cultural environment of a place to explain variations in innovation activity, entrepreneurial dynamics, and economic growth. Prominent among these studies is Richard Florida’s creative class theory. He argues that urban economies grow because they are tolerant, diverse, and open to creativity, which in turn attracts certain groups of people, the so-called creative class. Lee, Florida, and Acs expand the theory into the realm of entrepreneurship. They argue that new firm formation is positively associated with a creative and diverse social environment. In other words, those regions that are alluring to creative talent, open to newcomers, and tolerant of those who are different, will also have more people taking the risk of founding a firm, leading to increased economic growth. The creative class theories, however, contrast with explanations that consider structural factors such as access to financial resources and markets, among others, as important markers of entrepreneurial success. In this article, we are interested in examining the ways in which a region’s creative milieu and its opportunity structures may help or hinder different kinds of entrepreneurs, in particular nontraditional entrepreneurs. We examine the effect of regional opportunity structures and creative milieu on women, Black, and Hispanic business ownership for the 50 largest metropolitan statistical areas (MSAs) in the United States in 2002. We find that opportunity structures, whether opportunity or barrier, better explain the dynamics for these entrepreneurs. They benefit from a regional environment that builds human capital and skill base, enables access to a variety of financial resources, and facilitates market access. Given the growth of women and minority businesses and their potential effect on regions, policymakers are well advised to tailor their policies to these groups.