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The Effects of New Business Formation on Regional Development over Time

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Author Info
Michael Fritsch
Pamela Mueller

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Abstract

In our analysis of the impact of new business formation on regional employment change we identified considerable time lags. We investigated the structure and extent of these time lags by applying the Almon lag model and found that new firms can have both a positive and a negative effect on regional employment. The results indicate that the indirect effects of new business formation (crowding-out of competitors, improvement of supply conditions and improved competitiveness) are of greater magnitude than the direct effect, i.e. the jobs that are created in the new entities. The peak of the positive impact of new businesses on regional development is reached about eight years after entry.

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Paper provided by Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group in its series Papers on Entrepreneurship, Growth and Public Policy with number 2004-36.

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Length: 33 pages
Date of creation: Jul 2004
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Handle: RePEc:esi:egpdis:2004-36

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Related research
Keywords: Regional growth; new businesses; entrepreneurship; time lags.;

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Find related papers by JEL classification:
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
O1 - Economic Development, Technological Change, and Growth - - Economic Development
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bosma, N. & Nieuwenhuijsen, H., 1999. "Turbulence and Productivity in the Netherlands," Papers 9909/e, NEUHUYS - RESEARCH INSTITUTE FOR SMALL AND MEDIUM.
    Other versions:
  2. Winter, Sidney G., 1984. "Schumpeterian competition in alternative technological regimes," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 287-320. [Downloadable!] (restricted)
  3. Zoltan Acs & Catherine Armington, 2004. "Employment Growth and Entrepreneurial Activity in Cities," Regional Studies, Taylor and Francis Journals, vol. 38(8), pages 911-927, January. [Downloadable!] (restricted)
    Other versions:
  4. Per Davidsson & Leif Lindmark & Christer Olofsson, 1994. "New Firm Formation and Regional Development in Sweden," Regional Studies, Taylor and Francis Journals, vol. 28(4), pages 395-410, July. [Downloadable!] (restricted)
  5. Michael Fritsch & Oliver Falck, 2003. "New Firm Formation by Industry over Space and Time: A Multi-Level Analysis," Discussion Papers of DIW Berlin 322, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  6. Michael Fritsch & Antje Weyh, 2006. "How Large are the Direct Employment Effects of New Businesses? An Empirical Investigation for West Germany," Small Business Economics, Springer, vol. 27(2), pages 245-260, October. [Downloadable!] (restricted)
  7. Adriaan J. van Stel & David J. Storey, 2004. "The link between firm births and job creation: Is there a Upas Tree effect?," Papers on Entrepreneurship, Growth and Public Policy 2004-33, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group. [Downloadable!]
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  8. Michael Fritsch & Udo Brixy & Oliver Falck, 2006. "The Effect of Industry, Region, and Time on New Business Survival – A Multi-Dimensional Analysis," Review of Industrial Organization, Springer, vol. 28(3), pages 285-306, 05. [Downloadable!] (restricted)
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  9. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Restructuring and productivity growth in uk manufacturing," Economic Journal, Royal Economic Society, vol. 113(489), pages 666-694, 07. [Downloadable!] (restricted)
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  10. Boeri, Tito & Cramer, Ulrich, 1992. "Employment growth, incumbents and entrants : Evidence from Germany," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 545-565, December. [Downloadable!] (restricted)
  11. D.B. Audretsch & M.A. Carree & A.R. Thurik, 2001. "Does Entrepreneurship reduce Unemployment?," Tinbergen Institute Discussion Papers 01-074/3, Tinbergen Institute, revised 24 Oct 2008. [Downloadable!]
  12. David B. Audretsch & Michael Fritsch, 2002. "Growth Regimes over Time and Space," Regional Studies, Taylor and Francis Journals, vol. 36(2), pages 113-124, April. [Downloadable!] (restricted)
  13. Audretsch, D.B. & Fritsch, M., 1993. "A Note on the Measurement of Entry Rates," Papers 93-5, Bergakademie Freiberg Technical University - Faculty of Economics and Business Administration.
  14. Fritsch, Michael, 1997. " New Firms and Regional Employment Change," Small Business Economics, Springer, vol. 9(5), pages 437-48, October. [Downloadable!] (restricted)
  15. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December. [Downloadable!] (restricted)
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