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Employment effects of business dynamics: Mice, Gazelles and Elephants

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Author Info
Zoltan Acs
Pamela Mueller ()

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Abstract

This paper examines the relationship between business dynamics and employment effects in 320 U.S. Metropolitan Statistical Areas (MSA). Much of the theoretical work on industry dynamics focuses on the role of noisy selection and incomplete information on entry and survival. We extend this research by looking at the impact of firm heterogeneity on employment persistence. We find that only start-ups with greater than twenty employees have persistent employment effects over time and only in large diversified metropolitan regions. Therefore, both the type of entry and the characteristics of the region are important for employment growth.

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Paper provided by Max Planck Institute of Economics, Group for Entrepreneurship, Growth and Public Policy in its series Discussion Papers on Entrepreneurship, Growth and Public Policy with number 2006-23.

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Length: 30 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:esi:egpdis:2006-23

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Related research
Keywords: Industry dynamics new business formation employment effects regions

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Find related papers by JEL classification:
J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies
L6 - Industrial Organization - - Industry Studies: Manufacturing
L8 - Industrial Organization - - Industry Studies: Services
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups

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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. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, vol. 39(5), pages 659-81, September. [Downloadable!] (restricted)
  2. 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:
  3. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November. [Downloadable!] (restricted)
    Other versions:
  4. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 53-82, January. [Downloadable!] (restricted)
  5. Catherine Armington & Zoltan J. Acs, 2002. "The Determinants of Regional Variation in New Firm Formation," Regional Studies, Taylor and Francis Journals, vol. 36(1), pages 33-45, February. [Downloadable!] (restricted)
  6. Davis, Steven J & Haltiwanger, John & Schuh, Scott, 1996. " Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts," Small Business Economics, Springer, vol. 8(4), pages 297-315, August.
    Other versions:
  7. repec:att:wimass:19894 is not listed on IDEAS
  8. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
  9. Michael Fritsch & Pamela Mueller, 2004. "The Effects of New Business Formation on Regional Development over Time," Discussion Papers on Entrepreneurship, Growth and Public Policy 2004-36, Max Planck Institute of Economics, Group for Entrepreneurship, Growth and Public Policy. [Downloadable!]
  10. Michael Fritsch & Pamela Mueller, 2006. "The Effect of New Business Formation on Regional Development over Time: The Case of Germany," Discussion Papers on Entrepreneurship, Growth and Public Policy 2006-19, Max Planck Institute of Economics, Group for Entrepreneurship, Growth and Public Policy. [Downloadable!]
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  11. Zoltan J. Acs & Catherine Armington, 2004. "Job Creation and Persistence in Services and Manufacturing," Discussion Papers on Entrepreneurship, Growth and Public Policy 2004-16, Max Planck Institute of Economics, Group for Entrepreneurship, Growth and Public Policy. [Downloadable!]
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  12. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn. [Downloadable!] (restricted)
  13. Michael Fritsch & Pamela Mueller, 2004. "Effects of New Business Formation on Regional Development over Time," Regional Studies, Taylor and Francis Journals, vol. 38(8), pages 961-975, January. [Downloadable!] (restricted)
  14. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 657-74, August. [Downloadable!] (restricted)
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  15. Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August. [Downloadable!] (restricted)
    Other versions:
  16. Richard Florida & Zoltan Acs & Sam Youl Lee, 2004. "Creativity and Entrepreneurship: A Regional Analysis of New Firm Formation," Discussion Papers on Entrepreneurship, Growth and Public Policy 2004-17, Max Planck Institute of Economics, Group for Entrepreneurship, Growth and Public Policy. [Downloadable!]
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  17. Zoltan Acs & David Storey, 2004. "Introduction: Entrepreneurship and Economic Development," Regional Studies, Taylor and Francis Journals, vol. 38(8), pages 871-877, January. [Downloadable!] (restricted)
  18. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  19. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier. [Downloadable!] (restricted)
  20. Pamela Mueller & André van Stel & David J. Storey, 2006. "The effects of new firm formation on regional development over time: The case of Great Britain," Discussion Papers on Entrepreneurship, Growth and Public Policy 2006-24, Max Planck Institute of Economics, Group for Entrepreneurship, Growth and Public Policy. [Downloadable!]
    Other versions:
  21. Steven Klepper, 2002. "The capabilities of new firms and the evolution of the US automobile industry," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 645-666, August.
  22. Zoltan J Acs & Catherine Armington, 1998. "Longitudinal Establishment And Enterprise Microdata (LEEM) Documentation," Working Papers 98-9, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  23. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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. Henrekson, Magnus & Johansson, Dan, 2008. "Gazelles as Job Creators – A Survey and Interpretation of the Evidence," Ratio Working Papers 117, The Ratio Institute. [Downloadable!]
  2. Henrekson, Magnus & Johansson, Dan, 2008. "Gazelles as Job Creators – A Survey and Interpretation of the Evidence," Working Paper Series 733, Research Institute of Industrial Economics. [Downloadable!]
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