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Starting a business after unemployment: characteristics and chances of success (empirical evidence from a regional German labour market)

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  • Thomas Hinz
  • Monika Jungbauer-Gans

Abstract

Labour market policy in Germany strongly supports initiatives to found new businesses. In addition to credit programmes with low interest rates open to everyone, the state also supports the foundation of businesses by the unemployed. Business founders who are entitled to receive unemployment compensation get temporary financial assistance to start up a business on their own. In this paper, the authors evaluate how this policy instrument works. The analysis is based on data taken from a mail survey with business founders who started their businesses in 1995 in the metropolitan area of Munich. The results show that it is hard to define whether the programme supports additional business foundations. However, the authors have some empirical evidence that this might be the case. In addition, the analysis did not reveal a deficit in human capital among the unemployed founders. However, a deficit in financial resources was detected. Unemployed founders have to negotiate higher hurdles if they want to raise outside capital. The businesses founded by the unemployed founders are on average as competitive as those founded by employed founders; however, they show a slower pace of employment growth. Furthermore, the authors demonstrate that the unemployed founders are a highly selective sample of all the unemployed, especially if one focuses on human capital resources. As a consequence, the effects of the programme should be interpreted conservatively.

Suggested Citation

  • Thomas Hinz & Monika Jungbauer-Gans, 1999. "Starting a business after unemployment: characteristics and chances of success (empirical evidence from a regional German labour market)," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 11(4), pages 317-333, October.
    • Handle: RePEc:taf:entreg:v:11:y:1999:i:4:p:317-333
    DOI: 10.1080/089856299283137
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    References listed on IDEAS

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    1. Semlinger, Klaus, 1995. "Arbeitsmarktpolitik für Existenzgründer: Plädoyer für eine arbeitsmarktpolitische Unterstützung des Existenzgründungsgeschehens," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 95-204, WZB Berlin Social Science Center.
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    1. repec:diw:diwwpp:dp1241 is not listed on IDEAS
    2. Fossen, Frank M. & Büttner, Tobias J.M., 2013. "The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees," Economics of Education Review, Elsevier, vol. 37(C), pages 66-84.
    3. Oberschachtsiek, Dirk & Scioch, Patrycja, 2011. "The outcome of coaching and training for self-employment : a statistical evaluation of non-financial support schemes for unemployed business founders in Germany," IAB-Discussion Paper 201116, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Gohmann, Stephan F. & Fernandez, Jose M., 2014. "Proprietorship and unemployment in the United States," Journal of Business Venturing, Elsevier, vol. 29(2), pages 289-309.

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