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The link between firm births and job creation: Is there a Upas Tree effect?

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  • Adriaan J. van Stel
  • David J. Storey

Abstract

This paper examines the relationship between firm births and job creation in Great Britain. We use a new data set for 60 British regions, covering the whole of Great Britain, between 1980 and 1998. The relationship between new-firm startups and employment growth has previously been examined either with no time-lag or with only a short period lag. We find, for GB as a whole, no significant relationship between startups and employment creation in the 1980s, but a negative relationship for the 'low enterprise' area of the North East of England. For the 1990s we find a significant positive relationship for GB as a whole but for Scotland, which focussed policy on startups, a negative relationship. We feel this raises questions over policies designed to raise rates of new firm formation as a strategy for employment creation, particularly in 'low enterprise' areas.

Suggested Citation

  • Adriaan J. van Stel & David J. Storey, 2004. "The link between firm births and job creation: Is there a Upas Tree effect?," Papers on Entrepreneurship, Growth and Public Policy 2004-33, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    • Handle: RePEc:esi:egpdis:2004-33
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    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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