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The economic contribution of start-up firms in Germany

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  • Schneck, Stefan
  • May-Strobl, Eva

Abstract

This paper utilizes German tax data to present evidence about the direct and indirect effects of new firm formation. Cohort analysis is applied to investigate survival, sales, inputs, and value added of start-up firms. Most drop-outs occur in the early years. We show that start-up microenterprises increase economic vitality directly. Turnover and value added are in an approximate proportion of 3:1. With respect to the indirect effects of new firms, we find that one Euro of sales induce considerable indirect effects because 66 Cents are used to buy products and services from incumbents. For this reason, new firms substantially promote economic prosperity of incumbents. Sectoral differences are also indicated, with the manufacturing industry generating highest sales and relying on most inputs in the early periods.

Suggested Citation

  • Schneck, Stefan & May-Strobl, Eva, 2014. "The economic contribution of start-up firms in Germany," Working Papers 02/14, Institut für Mittelstandsforschung (IfM) Bonn.
    • Handle: RePEc:zbw:ifmwps:0214
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    References listed on IDEAS

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    Cited by:

    1. Pahnke, André & Welter, Friederike, 2019. "The German Mittelstand: Antithesis to the Silicon Valley entrepreneurship model?," Working Papers 01/19, Institut für Mittelstandsforschung (IfM) Bonn.
    2. André Pahnke & Friederike Welter, 2019. "The German Mittelstand: antithesis to Silicon Valley entrepreneurship?," Small Business Economics, Springer, vol. 52(2), pages 345-358, February.
    3. Schneck, Stefan, 2018. "Times are a changin'? The emergence of new firms and rank persistence," Working Papers 01/18, Institut für Mittelstandsforschung (IfM) Bonn.
    4. Stefan Schneck, 2020. "Times are a Changin’? The Emergence of New Firms and Rank Reshuffling," Journal of Industry, Competition and Trade, Springer, vol. 20(1), pages 1-33, March.

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    More about this item

    Keywords

    entrepreneurship; direct effects; indirect effects; sales;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other

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