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Business Cycles and Start-ups across Industries: An Empirical Analysis of German Regions

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  • Konon, Alexander

    (DIW Berlin)

  • Fritsch, Michael

    (University of Jena)

  • Kritikos, Alexander S.

    (DIW Berlin)

Abstract

We analyze whether start-up rates in different industries systematically change with business cycle variables. Using a unique data set at the industry level, we mostly find correlations that are consistent with counter-cyclical influences of the business cycle on entries in both innovative and non-innovative industries. Entries into the large-scale industries, including the innovative part of manufacturing, are only influenced by changes in the cyclical component of unemployment, while entries into small-scale industries, like knowledge intensive services, are mostly influenced by changes in the cyclical component of GDP. Thus, our analysis suggests that favorable conditions in terms of high GDP might not be germane for start-ups. Given that both innovative and non-innovative businesses react counter-cyclically in 'regular' recessions, business formation may have a stabilizing effect on the economy.

Suggested Citation

  • Konon, Alexander & Fritsch, Michael & Kritikos, Alexander S., 2018. "Business Cycles and Start-ups across Industries: An Empirical Analysis of German Regions," IZA Discussion Papers 11501, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11501
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    Cited by:

    1. Audretsch, David B. & Kritikos, Alexander S. & Schiersch, Alexander, 2020. "Microfirms and innovation in the service sector," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 997-1018.
    2. Audretsch, David & Hafenstein, Marian & Kritikos, Alexander S. & Schiersch, Alexander, 2018. "Firm Size and Innovation in the Service Sector," IZA Discussion Papers 12035, Institute of Labor Economics (IZA).
    3. Fossen, Frank M., 2019. "Entrepreneurship over the Business Cycle in the United States: A Decomposition," IZA Discussion Papers 12499, Institute of Labor Economics (IZA).
    4. Robert W. Fairlie & Frank M. Fossen, 2019. "Defining Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation," NBER Working Papers 26377, National Bureau of Economic Research, Inc.
    5. Katarzyna Haverkamp & Petrik Runst & Till Proeger, 2021. "Das Handwerk zwischen Corona-Krise und Rückvermeisterung [The Effects of COVID-19 Induced Lockdown Measures on Market Entry and Exits in the Skilled Crafts Sector]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(3), pages 194-199, March.
    6. Adam P. Balcerzak & Michal Bernard Pietrzak (ed.), 2021. "Contemporary Issues in Economy. Proceedings of the International Conference on Applied Economics: Quantitative Methods," Books, Institute of Economic Research, edition 1, volume 11, number 28, Spring.
    7. Sotirakopoulos, Panagiotis & Guven, Cahit & Ulker, Aydogan & Graham, Carol, 2021. "Macroeconomic Contractions during Impressionable Years and Entrepreneurship in Later Adulthood," GLO Discussion Paper Series 850, Global Labor Organization (GLO).
    8. Frank M. Fossen, 2021. "Self-employment over the business cycle in the USA: a decomposition," Small Business Economics, Springer, vol. 57(4), pages 1837-1855, December.

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    More about this item

    Keywords

    new business formation; entrepreneurship; business cycle; manufacturing; services; innovative industries;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • 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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