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Regional Entrepreneurial Heritage in a Socialist and Post-socialist Economy

  • Michael Wyrwich

    ()

The main aim of this paper is to enhance our knowledge of the role of regional entrepreneurial culture that is important to foster economic growth. The paper sheds light on regional differences of self-employment and start-up activities in a socialist and post-socialist economy, which is to the authors’ best knowledge a unique approach. The role of entrepreneurs in a socialist economy was marginal. Entrepreneurial activities were restricted mainly to handicrafts, retailing and gastronomy in the region of analysis of the present paper. This region is the eastern part of Germany which comprises the former socialist German Democratic Republic (GDR). It is shown by regression analysis that regions with a long industrial and entrepreneurial tradition had higher rates of self-employment in socialist times and remarkably higher start-up rates in manufacturing after the transition towards a market economy. Astonishingly those regions with a high share of traditional manufacturing industries with a long regional tradition and where entrepreneurship played an important role in pre-socialist times had higher self-employment rates in 1989. Regions with a high self-employment rate and a high share of traditional manufacturing industries in 1989 have higher start-up rates in manufacturing even more than 10 years after transition and a vast structural change in between. This result holds when controlling for industry structure and several other regional factors. Thus, even the “natural experiment” of four decades of socialism and one of the most severe industrial restructuring and decline of an economy in the 20th century could not destroy the entrepreneurial climate of regions. It seems that some regions have a certain entrepreneurial heritage, which is an important regionally embedded resource. An important implication for policy is that it seems to be long lasting task to turn entrepreneurial laggards into entrepreneurial hotspots since far reaching developments in industrial history seem to matter.

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File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa10/ERSA2010finalpaper495.pdf
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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa10p495.

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Date of creation: Sep 2011
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Handle: RePEc:wiw:wiwrsa:ersa10p495
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  1. Michael Fritsch & Oliver Falck, 2007. "New Business Formation by Industry over Space and Time: A Multidimensional Analysis," Regional Studies, Taylor & Francis Journals, vol. 41(2), pages 157-172.
  2. Yuko Aoyama, 2009. "Entrepreneurship and Regional Culture: The Case of Hamamatsu and Kyoto, Japan," Regional Studies, Taylor & Francis Journals, vol. 43(3), pages 495-512.
  3. Hans-Werner Sinn, 2000. "Germany's Economic Unification. An Assessment after Ten Years," CESifo Working Paper Series 247, CESifo Group Munich.
  4. Joachim Wagner & Rolf Sternberg, 2004. "Start-up activities, individual characteristics, and the regional milieu: Lessons for entrepreneurship support policies from German micro data," The Annals of Regional Science, Springer, vol. 38(2), pages 219-240, 06.
  5. Christine Tamasy, 2006. "Determinants of regional entrepreneurship dynamics in contemporary Germany: A conceptual and empirical analysis," Regional Studies, Taylor & Francis Journals, vol. 40(4), pages 365-384.
  6. Fritsch, Michael, 2004. "Entrepreneurship, entry and performance of new business compared in two growth regimes: East and West Germany," Freiberg Working Papers 2004,09, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  7. Audretsch, David B. & Fritsch, Michael, 1993. "A Note on the Measurement of Entry Rates," Freiberg Working Papers 1993,05, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  8. Florax, Raymond J. G. M. & Folmer, Hendrik & Rey, Sergio J., 2003. "Specification searches in spatial econometrics: the relevance of Hendry's methodology," Regional Science and Urban Economics, Elsevier, vol. 33(5), pages 557-579, September.
  9. Vinod Sutaria & Donald A. Hicks, 2004. "New firm formation: Dynamics and determinants," The Annals of Regional Science, Springer, vol. 38(2), pages 241-262, 06.
  10. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  11. Hall, John & Ludwig, Udo, 1995. "German Unification and the 'Market Adoption' Hypothesis," Cambridge Journal of Economics, Oxford University Press, vol. 19(4), pages 491-507, August.
  12. David Audretsch & Michael Fritsch, 2002. "Growth Regimes over Time and Space," Regional Studies, Taylor & Francis Journals, vol. 36(2), pages 113-124.
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