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The effects of new firm formation on regional development over time: The case of Great Britain

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  • André van Stel
  • David Storey
  • Pamela Mueller

Abstract

This paper re-examines the link between new firm formation and subsequent employment growth. It investigates whether it is possible to have the 'wrong type of entrepreneurship' defined as new firm formation which leads to zero or even negative subsequent employment growth. It uses a very similar approach to that of Fritsch and Mueller (2004), confirming their findings that the employment impact of new firm formation is in three discrete phases. Then, using data for Great Britain, the paper shows the employment impact of new firm formation is significantly positive in England, but zero in Scotland where formation rates are much lower. It also shows that, in the low enterprise counties of GB, new firm formation has a negative effect on employment, implying that we find that the 'wrong type of entrepreneurship' is possible.

Suggested Citation

  • André van Stel & David Storey & Pamela Mueller, 2006. "The effects of new firm formation on regional development over time: The case of Great Britain," Scales Research Reports H200618, EIM Business and Policy Research.
    • Handle: RePEc:eim:papers:h200618
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    References listed on IDEAS

    as
    1. Adriaan Van Stel & David Storey, 2004. "The Link between Firm Births and Job Creation: Is there a Upas Tree Effect?," Regional Studies, Taylor & Francis Journals, vol. 38(8), pages 893-909.
    2. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
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    Cited by:

    1. Michael Fritsch & Alexandra Schroeter, 2011. "Does Quality make a Difference? Employment Effects of High- and Low-Quality Start-ups," ERSA conference papers ersa10p1400, European Regional Science Association.
    2. Rui Baptista & Vítor Escária & Paulo Madruga, 2008. "Entrepreneurship, regional development and job creation: the case of Portugal," Small Business Economics, Springer, vol. 30(1), pages 49-58, January.
    3. Martin Andersson & Florian Noseleit, 2011. "Start-ups and employment dynamics within and across sectors," Small Business Economics, Springer, vol. 36(4), pages 461-483, May.
    4. Martin Andersson & Florian Noseleit, 2008. "Start-Ups and Employment Growth - Evidence from Sweden," Jena Economic Research Papers 2008-091, Friedrich-Schiller-University Jena.
    5. André Stel & Kashifa Suddle, 2008. "The impact of new firm formation on regional development in the Netherlands," Small Business Economics, Springer, vol. 30(1), pages 31-47, January.
    6. Michael Fritsch & Alexandra Schroeter, 2011. "Why does the effect of new business formation differ across regions?," Small Business Economics, Springer, vol. 36(4), pages 383-400, May.
    7. C. Praag & Peter Versloot, 2007. "What is the value of entrepreneurship? A review of recent research," Small Business Economics, Springer, vol. 29(4), pages 351-382, December.
    8. Heather M. Stephens & Mark D. Partridge, 2011. "Do Entrepreneurs Enhance Economic Growth in Lagging Regions?," Growth and Change, Wiley Blackwell, vol. 42(4), pages 431-465, December.
    9. P. Mueller, 2006. "Entrepreneurship in the Region: Breeding Ground for Nascent Entrepreneurs?," Small Business Economics, Springer, vol. 27(1), pages 41-58, August.
    10. Michael Fritsch & Pamela Mueller, 2008. "The effect of new business formation on regional development over time: the case of Germany," Small Business Economics, Springer, vol. 30(1), pages 15-29, January.
    11. Fritsch, Michael, 2013. "New Business Formation and Regional Development: A Survey and Assessment of the Evidence," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 9(3), pages 249-364, February.
    12. Sierdjan Koster & Charlie Karlsson, 2010. "New Firm Formation and Economic Development in a Globalizing Economy," Chapters,in: Entrepreneurship and Regional Development, chapter 3 Edward Elgar Publishing.
    13. 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.
    14. Zoltán J. Ács & Pamela Mueller, 2015. "Employment effects of business dynamics: Mice, Gazelles and Elephants," Chapters,in: Global Entrepreneurship, Institutions and Incentives, chapter 16, pages 304-319 Edward Elgar Publishing.
    15. Marcus Dejardin & Michael Fritsch, 2011. "Entrepreneurial dynamics and regional growth," Small Business Economics, Springer, vol. 36(4), pages 377-382, May.
    16. Semiha Turgut & Aliye Ahu Akgun, 2015. "The Causality Between Entrepreneurial Activities and Regional Economic Growth: Case of Turkey," ERSA conference papers ersa15p1093, European Regional Science Association.
    17. Michael Fritsch, 2008. "How does new business formation affect regional development? Introduction to the special issue," Small Business Economics, Springer, vol. 30(1), pages 1-14, January.
    18. Michael Fritsch & Michael Wyrwich, 2012. "The Long Persistence of Regional Entrepreneurship Culture: Germany 1925-2005," Jena Economic Research Papers 2012-036, Friedrich-Schiller-University Jena.
    19. André van Stel & Sierdjan Koster, 2011. "The relationship between start-ups, market mobility and employment growth: An empirical analysis for Dutch regions," Scales Research Reports H201104, EIM Business and Policy Research.
    20. André van Stel & Roy Thurik & Gerard Scholman, 2014. "The relationship between entrepreneurial activity, the business cycle and economic openness," Scales Research Reports H201218, EIM Business and Policy Research.
    21. M.A. Carree & A.R. Thurik, 2008. "The Lag Structure of the Impact of Business Ownership on Economic Performance in OECD Countries," Small Business Economics, Springer, vol. 30(1), pages 101-110, January.
    22. Sierdjan Koster, 2011. "Individual foundings and organizational foundings: their effect on employment growth in The Netherlands," Small Business Economics, Springer, vol. 36(4), pages 485-501, May.
    23. Rui Baptista & Miguel Preto, 2011. "New firm formation and employment growth: regional and business dynamics," Small Business Economics, Springer, vol. 36(4), pages 419-442, May.

    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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