The relationship between start†ups, market mobility and employment growth: An empirical analysis for Dutch regions

Recent literature suggests two mechanisms through which the start†up of new firms contributes to economic development: the growth of start†ups and competition among incumbent firms induced by the start†ups. While existing studies derive the competition effect indirectly, this paper deploys a direct measure, called market mobility, to approximate the induced competition effect. The empirical results are consistent with the idea that both effects are important in explaining the long†term economic impact of start†ups. First, the most successful start†ups grow to become high†growth firms, and second, the entry of new firms stimulates incumbent firms to perform better.