Why Does the Effect of New Business Formation Differ Across Regions?

40 Pages Posted: 4 Nov 2007

See all articles by Michael Fritsch

Michael Fritsch

University of Jena - School of Economics and Business Administration

Alexandra Schroeter

University of Jena

Date Written: November 2007

Abstract

We investigate regional differences of the effect of new business formation on employment growth in West Germany. We find an inverse 'u'-shaped relationship between the level of start-up activity and employment change. The main variables that shape the employment effects of new businesses in a region are population density, the share of medium level skilled workers, the proportion of Research and Development conducted in small businesses (entrepreneurial technological regime), the unemployment rate as well as the degree of specialization of the regional economy. However, indicators for education and innovation activity in the region proved not to be statistically significant. Conducting our analysis for manufacturing and services separately confirmed the pattern of our previous results only for manufacturing but not for services.

Keywords: entrepreneurship, new business formation, regional development, entrepreneurship policy

JEL Classification: M13, O1, O18, R11

Suggested Citation

Fritsch, Michael and Schroeter, Alexandra, Why Does the Effect of New Business Formation Differ Across Regions? (November 2007). Jena Economic Research Paper No. 2007-077, Available at SSRN: https://ssrn.com/abstract=1026601 or http://dx.doi.org/10.2139/ssrn.1026601

Michael Fritsch (Contact Author)

University of Jena - School of Economics and Business Administration ( email )

Carl-Zeiss-Str. 3
D-07743 Jena
Germany

Alexandra Schroeter

University of Jena ( email )

Furstengraben 1
Jena, Thuringa 07743
Germany

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