Is too small always bad? the role of place attachment in harnessing location advantages

Abstract

Abstract Despite the economic significance of micro-enterprises, the empirical evidence on the contextual factors unlocking their growth potential is somewhat scant. This study pitches into this stream of research by linking micro-enterprises, agglomeration economies, and place attachment literature. Specifically, this research explores whether micro-enterprises benefit the most from the location in agglomerations and from having a local manager in charge of the business capturing the connections to the immediate surroundings. By drawing on secondary data from Italian manufacturing companies, our findings show that micro-enterprises are less productive than the larger ones and that having a local manager further exacerbates the productivity gap. However, the influence of place attachment on productivity reverts to positive when micro-enterprises dwell in agglomerated areas, where they are better positioned to capitalize on localization economies. Our study unveils the ambivalent effect of place attachment on productivity, allowing micro-enterprises mainly to achieve higher productivity gains from agglomerations. Theoretical contributions to contextualizing entrepreneurship research and micro-enterprises growth as well as policy and managerial implications are discussed.