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Does Quality Make a Difference?: Employment Effects of High- and Low-Quality Start-Ups

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  • Michael Fritsch
  • Alexandra Schroeter

Abstract

This paper investigates the impact of new firms' quality on the magnitude of their employment effects. Our results clearly show that the quality of start-ups, measured by their affiliation with sectors and innovative industries, strongly influences the direct and the overall employment contribution of new firms. In particular, start-ups in manufacturing industries generate larger direct and overall growth effects than those in services. Moreover, new businesses in innovative manufacturing and in knowledge-intensive service industries make a larger direct contribution to employment than start-ups affiliated with other industries. We also find a relatively strong overall effect of new business formation in knowledge-intensive service industries. However, the impact of start-ups in innovative manufacturing industries on overall regional employment growth is not statistically significant, which may be mainly due to their rather small share in all start-ups and because they impact more on firms and employment in other regions than do start-ups in non-innovative manufacturing. Finally, we discuss the implications for entrepreneurship policy that can be derived from our findings.

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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1128.

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Length: 31 p.
Date of creation: 2011
Date of revision:
Handle: RePEc:diw:diwwpp:dp1128

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Keywords: Entrepreneurship; new business formation; innovative industries; regional development; entrepreneurship policy;

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  1. Zoltan Acs & Pamela Mueller, 2008. "Employment effects of business dynamics: Mice, Gazelles and Elephants," Small Business Economics, Springer, vol. 30(1), pages 85-100, January.
  2. Michael Fritsch & Florian Noseleit, 2011. "Start-ups, Long- and Short-Term Survivors and their Effect on Regional Employment Growth," ERSA conference papers ersa10p1102, European Regional Science Association.
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Cited by:
  1. Michael Fritsch, 2011. "New Business Formation and Regional Development: A Survey and Assessment of the Evidence," Discussion Papers of DIW Berlin 1127, DIW Berlin, German Institute for Economic Research.
  2. Michael Fritsch & Florian Noseleit, 2013. "Indirect employment effects of new business formation across regions: The role of local market conditions," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 361-382, 06.

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