New Firm Formation and Sustainable Regional Economic Development – Relevance, Empirical Evidence, Policies

The ICER Working Paper Series on Entrepreneurship and Innovation WP8

11 Pages Posted: 28 Feb 2014

See all articles by Michael Fritsch

Michael Fritsch

University of Jena - School of Economics and Business Administration

Date Written: February 27, 2014

Abstract

The belief that new business formation is a source of economic growth is widespread. This belief has been a strong motivation for a great deal of research in entrepreneurship. It has also motivated politicians in many countries to devise strategies aimed at stimulating the formation of new firms. However, the theoretical as well as the empirical foundation for this belief are remarkably weak. Empirical research on the issue started late and only recently have researchers begun to assess the effects of new businesses on economic development in detail.

The effect of new business formation on regional development is an important field of research. A proper understanding of these relationships may provide valuable inputs for policies aimed at stimulating growth. This short introduction provides an overview on the current state of knowledge about the effects that new businesses have on regional development. The focus is on regions for three reasons. First, geographical units of observation are much better suited for such an analysis than are industries. Second, empirical research has shown that the magnitude of the effects of new business formation on growth differs considerably across regions pointing to the importance of region-specific factors. Third, regions are an important arena for development policy (for an extensive review see Fritsch, 2013).

Keywords: new firm formation, sustainable, regional economic development

Suggested Citation

Fritsch, Michael, New Firm Formation and Sustainable Regional Economic Development – Relevance, Empirical Evidence, Policies (February 27, 2014). The ICER Working Paper Series on Entrepreneurship and Innovation WP8, Available at SSRN: https://ssrn.com/abstract=2402229 or http://dx.doi.org/10.2139/ssrn.2402229

Michael Fritsch (Contact Author)

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

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

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