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

  • Michael Fritsch
  • Alexandra Schroeter

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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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.372677.de/dp1128.pdf
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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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  1. Stephen Redding & Daniel M. Sturm, 2005. "The Costs of Remoteness: Evidence from German Division and Reunification," STICERD - Political Economy and Public Policy Paper Series 11, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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  6. Licht, Georg & Nerlinger, Eric, 1998. "New technology-based firms in Germany: a survey of the recent evidence," Research Policy, Elsevier, vol. 26(9), pages 1005-1022, April.
  7. Michael Fritsch & Florian Noseleit, 2009. "Start-ups, Long- and Short-Term Survivors and their Effect on Regional Employment Growth," Jena Economic Research Papers 2009-081, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  8. Audretsch, David B. & Fritsch, Michael, 1993. "A Note on the Measurement of Entry Rates," Freiberg Working Papers 1993,05, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
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  11. Rui Baptista & Paulo Madruga & Vitor Escaria, . "Entrepreneurship, Regional Development and Job Creation: the Case of Portugal," Papers on Entrepreneurship, Growth and Public Policy 2005-06, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
  12. Henrekson, Magnus & Johansson, Dan, 2008. "Competencies and Institutions Fostering High-growth Firms," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 5(1), pages 1-80, November.
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  21. Michael Fritsch, 2011. "The effect of new business formation on regional development - Empirical evidence, interpretation, and avenues for further research," Jena Economic Research Papers 2011-006, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  22. David Audretsch & Patrick Houweling & A. Thurik, 2000. "Firm Survival in the Netherlands," Review of Industrial Organization, Springer, vol. 16(1), pages 1-11, February.
  23. Michael Fritsch & Pamela Mueller, 2006. "The Effect of New Business Formation on Regional Development over Time: The Case of Germany," Papers on Entrepreneurship, Growth and Public Policy 2006-19, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
  24. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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  30. 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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