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The Role of the Regional Milieu for the Decision to Start a New Firm: Empirical Evidence for Germany

  • Wagner, Joachim

    ()

    (Leuphana University Lüneburg)

  • Sternberg, Rolf

    ()

    (University of Cologne)

Although comprehensive data from official statistics on new firm formation and entrepreneurs starting a new business are lacking in Germany, we know from empirical studies that entry rates differ between regions, and that the propensity to become an entrepreneur is influenced by socio-demographic variables like sex and age. The focus of our paper is on the link of these two stylised facts. Our econometric study is based on data for 10.000 persons from a recent representative survey of the population in ten German planning regions. We use a version of the probit model that takes care of the regional stratification of the data, and the results of the nonlinear models are carefully interpreted and illustrated. We show that the region matters for the decision to start a new business ceteris paribus, i.e. after controlling for sex, age, education etc. In a second step we peek inside the black box of the regional effect by showing that the regional level of current start-up activity has a positive ceteris paribus effect on the propensity to become an entrepreneur, while the share of self-employed in the region does not matter. The consequences of these findings for regional policies to encourage new firm entry are discussed briefly in the concluding section.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 494.

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Length: 29 pages
Date of creation: May 2002
Date of revision:
Publication status: published in: Annals of Regional Science, 2004, 38 (2), 219-240
Handle: RePEc:iza:izadps:dp494
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  1. Baumol, William J., 1986. "Entrepreneurship and a century of growth," Journal of Business Venturing, Elsevier, vol. 1(2), pages 141-145.
  2. David Audretsch & Michael Fritsch, 2002. "Growth Regimes over Time and Space," Regional Studies, Taylor & Francis Journals, vol. 36(2), pages 113-124.
  3. Rolf Sternberg & Christine Tamasy, 1999. "Munich as Germany's No. 1 High Technology Region: Empirical Evidence, Theoretical Explanations and the Role of Small Firm/Large Firm Relationships," Regional Studies, Taylor & Francis Journals, vol. 33(4), pages 367-377.
  4. Westlund, Hans & Bolton, Roger, 2003. " Local Social Capital and Entrepreneurship," Small Business Economics, Springer, vol. 21(2), pages 77-113, September.
  5. Eric A. Nerlinger & Franz-Josef Bade, 2000. "The spatial distribution of new technology-based firms: Empirical results for West-Germany," Papers in Regional Science, Springer, vol. 79(2), pages 155-176.
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