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New Business Formation and Regional Development: A Survey and Assessment of the Evidence

  • Fritsch, Michael

This monograph reviews the current state of knowledge about the effects of new business formation on regional development. These effects are diverse and include the creation and destruction of employment, introduction of innovations, structural change, and increasing productivity, among others. Theory particularly emphasizes the role that some new businesses play in the diffusion of knowledge and innovation as drivers of economic growth. I provide an explanatory approach that highlights the competitive challenge that start-ups pose to incumbent firms and discuss important implications. The overview of empirical research particularly deals with the development of start-up cohorts, identification of different types of indirect effects and their magnitude, differences based on characteristics of entry, and regional variation. A general conclusion is that the diverse indirect effects of new business formation on development are much more important than the growth effects created by newcomers. The diverse indirect effects of entry on development are currently less than fully understood. Finally, I draw conclusions for policy and put forward a number of important questions for further research.

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File URL: http://dx.doi.org/10.1561/0300000043
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Article provided by now publishers in its journal Foundations and Trends(R) in Entrepreneurship.

Volume (Year): 9 (2013)
Issue (Month): 3 (February)
Pages: 249-364

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Handle: RePEc:now:fntent:0300000043
Contact details of provider: Web page: http://www.nowpublishers.com/

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  1. Michael Fritsch & Pamela Mueller, 2004. "The Effects of New Business Formation on Regional Development over Time," Papers on Entrepreneurship, Growth and Public Policy 2004-36, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
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  5. Michael Fritsch & Oliver Falck, 2007. "New Business Formation by Industry over Space and Time: A Multidimensional Analysis," Regional Studies, Taylor & Francis Journals, vol. 41(2), pages 157-172.
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  17. Arabsheibani, Gholamreza & de Meza, David & Maloney, John & Pearson, Bernard, 2000. "And a vision appeared unto them of a great profit: evidence of self-deception among the self-employed," Economics Letters, Elsevier, vol. 67(1), pages 35-41, April.
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  30. Falck, Oliver, 2007. "Mayflies and long-distance runners: The effects of new business formation on industry growth," Munich Reprints in Economics 20474, University of Munich, Department of Economics.
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  35. Fritsch, Michael, 2004. "Entrepreneurship, entry and performance of new business compared in two growth regimes: East and West Germany," Freiberg Working Papers 2004,09, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  36. Poh Wong & Yuen Ho & Erkko Autio, 2005. "Entrepreneurship, Innovation and Economic Growth: Evidence from GEM data," Small Business Economics, Springer, vol. 24(3), pages 335-350, 01.
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