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The COVID-19 Pandemic and Entrepreneurship in Germany: First Observations and Interpretations

Author

Listed:
  • Michael Fritsch

    (Friedrich Schiller University Jena, Germany)

  • Maria Greve

    (Friedrich Schiller University Jena, Germany and University of Groningen, The Netherlands)

  • Michael Wyrwich

    (University of Groningen, The Netherlands and Friedrich Schiller University Jena, Germany)

Abstract

The COVID-19 pandemic severely affected not only incumbent firms, but also the emergence of start-ups. This paper investigates and analyzes the pandemic's effect on new business formation, as well as business exits and insolvencies, in Germany. We find that the overall level of business registrations slightly decreased during the first year of the pandemic, but that the effect is specific to certain industries. Innovative manufacturing industries and technology-oriented services experienced an increase in numbers of start-ups. High subsidies and a temporary suspension of important criteria obliging firms to declare insolvency weakened market selection resulting in fewer exits in 2020. The relaxation of insolvency regulations may lead to considerable numbers of 'zombie' firms. Generally, the pandemic re-enforced ongoing structural change, but also exerted specific effects that may be temporary in nature.

Suggested Citation

  • Michael Fritsch & Maria Greve & Michael Wyrwich, 2021. "The COVID-19 Pandemic and Entrepreneurship in Germany: First Observations and Interpretations," Jena Economics Research Papers 2021-007, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2021-007
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    File URL: https://oweb.b67.uni-jena.de/Papers/jerp2021/wp_2021_007.pdf
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    References listed on IDEAS

    as
    1. Konon, Alexander & Fritsch, Michael & Kritikos, Alexander S., 2018. "Business cycles and start-ups across industries: An empirical analysis of German regions," Journal of Business Venturing, Elsevier, vol. 33(6), pages 742-761.
    2. Sebnem Kalemli-Ozcan & Bent Sorensen & Carolina Villegas-Sanchez & Vadym Volosovych & Sevcan Yesiltas, 2015. "How to Construct Nationally Representative Firm Level Data from the Orbis Global Database: New Facts and Aggregate Implications," NBER Working Papers 21558, National Bureau of Economic Research, Inc.
    3. David Bailey & Jennifer Clark & Alessandra Colombelli & Carlo Corradini & Lisa De Propris & Ben Derudder & Ugo Fratesi & Michael Fritsch & John Harrison & Madeleine Hatfield & Tom Kemeny & Dieter F. K, 2020. "Regions in a time of pandemic," Regional Studies, Taylor & Francis Journals, vol. 54(9), pages 1163-1174, September.
    4. Sørensen, Bent E & Kalemli-Özcan, Sebnem & Volosovych, Vadym & Villegas-Sanchez, Carolina & Yesiltas, Sevcan, 2015. "How to construct nationally representative firm level data from the ORBIS global database," CEPR Discussion Papers 10829, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Albert, Christoph & Caggese, Andrea & González, Beatriz & Martin-Sanchez, Victor, 2023. "Income inequality and entrepreneurship: Lessons from the 2020 COVID-19 recession," Journal of Banking & Finance, Elsevier, vol. 149(C).

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    More about this item

    Keywords

    COVID-19; entrepreneurship; new business formation; Germany;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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