Regional and Sectoral Economic Studies Vol. 8-2 (2008) REGIONAL AND SECTORAL LOCATION PATTERNS OF NEW FIRMS: THE CASE OF GREECE Irene DASKALOPOULOU Panagiotis LIARGOVAS * Abstract This paper analyses the relationship between entrepreneurship and the external environment of firms. Entrepreneurship is approximated by start-ups in four industries, namely manufacturing, commerce, services and tourism. Agglomeration economies and state incentives to promote entrepreneurship at certain locations are the main environmental factors analysed here. Results support the argument that localization and urbanization economies affect different sectors in different ways. In such a context, the observed positive effect of state incentives upon entrepreneurship at certain locations might be counterbalanced by the presence of negative localization effects as suggested by the present findings regarding manufacturing start-ups. JEL Clasification: R30, R10 Key words : regional location, new firms, Greece 1. Introduction A thorough understanding of the effect of external factors, those related to the location or the environment of firms, upon entrepreneurship is missing despite the widely accepted idea that the lack of entrepreneurship inhibits economic growth (Acs and Audretsch, 2003). The need to better understand entrepreneurship and the formation of regional location patterns draws from the argument that the birth of firms outweighs in importance the corresponding deaths. Entrepreneurship is viewed as a successful mechanism for the allocation of capital and employment to new uses and the exploitation of market opportunities and new knowledge (Reynolds et al., 2004). In line with such views, entrepreneurial activity in the EU has received increased attention at all levels of * Address for correspondence: Panagiotis Liargovas, University of Peloponnese, School of Economics and Management, Department of Economics, Terma Karaiskaki Street, 22 100 Tripolis -Greece, E-mail: liargova@uop.gr