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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 & 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).
    2. Fossen, Frank M., 2019. "Entrepreneurship over the Business Cycle in the United States: A Decomposition," IZA Discussion Papers 12499, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    new business formation; entrepreneurship; business cycle; manufacturing; services; innovative industries;

    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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