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The Effects of New Business Formation on Regional Development over Time

Author Info

Listed author(s):
  • Michael Fritsch
  • Pamela Mueller

Abstract

In our analysis of the impact of new business formation on regional employment change we identified considerable time lags. We investigated the structure and extent of these time lags by applying the Almon lag model and found that new firms can have both a positive and a negative effect on regional employment. The results indicate that the indirect effects of new business formation (crowding-out of competitors, improvement of supply conditions and improved competitiveness) are of greater magnitude than the direct effect, i.e. the jobs that are created in the new entities. The peak of the positive impact of new businesses on regional development is reached about eight years after entry.

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Paper provided by Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group in its series Papers on Entrepreneurship, Growth and Public Policy with number 2004-36.

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Length: 33 pages
Date of creation: Jul 2004
Handle: RePEc:esi:egpdis:2004-36
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Keywords: Regional growth; new businesses; entrepreneurship; time lags.;

Find related papers by JEL classification:

  • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
  • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
  • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
  • 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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  1. Zoltan Acs & Catherine Armington, 2004. "Employment Growth and Entrepreneurial Activity in Cities," Regional Studies, Taylor & Francis Journals, vol. 38(8), pages 911-927.
  2. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
  3. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Restructuring and productivity growth in uk manufacturing," Economic Journal, Royal Economic Society, vol. 113(489), pages 666-694, 07.
  4. Winter, Sidney G., 1984. "Schumpeterian competition in alternative technological regimes," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 287-320.
  5. 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.
  6. Audretsch, D.B. & Fritsch, M., 1993. "A Note on the Measurement of Entry Rates," Papers 93-5, Bergakademie Freiberg Technical University - Faculty of Economics and Business Administration.
  7. Boeri, Tito & Cramer, Ulrich, 1992. "Employment growth, incumbents and entrants : Evidence from Germany," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 545-565, December.
  8. Bosma, N. & Nieuwenhuijsen, H., 1999. "Turbulence and Productivity in the Netherlands," Papers 9909/e, NEUHUYS - RESEARCH INSTITUTE FOR SMALL AND MEDIUM.
  9. Michael Fritsch & Udo Brixy & Oliver Falck, 2006. "The Effect of Industry, Region, and Time on New Business Survival – A Multi-Dimensional Analysis," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(3), pages 285-306, 05.
  10. David Audretsch & Michael Fritsch, 2002. "Growth Regimes over Time and Space," Regional Studies, Taylor & Francis Journals, vol. 36(2), pages 113-124.
  11. Roy Thurik, 2003. "Entrepreneurship and Unemployment in the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(3), pages 264-290, 08.
  12. Callejon, Maria & Segarra, Agusti, 1999. "Business Dynamics and Efficiency in Industries and Regions: The Case of Spain," Small Business Economics, Springer, vol. 13(4), pages 253-271, December.
  13. Michael Fritsch & Oliver Falck, 2003. "New Firm Formation by Industry over Space and Time: A Multi-Level Analysis," Discussion Papers of DIW Berlin 322, DIW Berlin, German Institute for Economic Research.
  14. Baldwin,John R. & Gorecki,Paul, 1998. "The Dynamics of Industrial Competition," Cambridge Books, Cambridge University Press, number 9780521633574, November.
  15. Michael Fritsch & Sandra Kublina, 2015. "Entrepreneurship,Growth, Regional Growth Regimes," Jena Economic Research Papers 2015-002, Friedrich-Schiller-University Jena.
  16. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
  17. Michael Fritsch & Antje Weyh, 2006. "How Large are the Direct Employment Effects of New Businesses? An Empirical Investigation for West Germany," Small Business Economics, Springer, vol. 27(2), pages 245-260, October.
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