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Does Quality make a Difference? Employment Effects of High- and Low-Quality Start-ups

  • Michael Fritsch

    ()

  • Alexandra Schroeter

This paper investigates the impact of new firms’ quality on the magnitude of their employment effects. Our results clearly show that the quality of start-ups, measured by their affiliation to sectors and innovative industries, strongly influences the direct and the overall employment contribution of new firms. In particular, start-ups in manufacturing industries generate larger direct and overall growth effects than those in services. Moreover, new businesses in innovative manufacturing and in knowledge-intensive service industries make a larger direct contribution to employment than start-ups affiliated to other industries. We also find a relatively strong overall effect of new business formation in knowledge-intensive service industries. The impact of start-ups in innovative manufacturing industries on overall regional employment growth is, however, not statistically significant what may be mainly a result of their rather small share in all start-ups and due to the fact that they impact more on firms in other regions than start-ups in non-innovative manufacturing. Finally, we discuss conclusions for entrepreneurship policy, which can be derived from our findings.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa10p1400.

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Date of creation: Sep 2011
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Handle: RePEc:wiw:wiwrsa:ersa10p1400
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