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How fast do newly founded firms mature? Empirical analyses on job quality in start-ups

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  • Brixy, Udo
  • Kohaut, Susanne
  • Schnabel, Claus

Abstract

Using a linked employer-employee data set for Germany, this paper analyzes labour fluctuation and wage setting in a cohort of newly founded and other establishments from 1997 to 2001. We show empirically that start-ups tend to have higher labour turnover rates, ceteris paribus. Moreover, bargaining coverage rates and wages in new firms are lower than in similar incumbent firms. Both the excess labour fluctuation and the wage differential are shown to decline and become insignificant over time as the newly founded firms mature. Our results imply that it takes a new firm only a few years to become an incumbent firm.

Suggested Citation

  • Brixy, Udo & Kohaut, Susanne & Schnabel, Claus, 2004. "How fast do newly founded firms mature? Empirical analyses on job quality in start-ups," Discussion Papers 30, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    • Handle: RePEc:zbw:faulre:30
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    1. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214, Elsevier.
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    5. Brixy, Udo & Kohaut, Susanne, 1999. "Employment Growth Determinants in New Firms in Eastern Germany," Small Business Economics, Springer, vol. 13(2), pages 155-170, September.
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    8. Matthew Barnes & Jonathan Haskel, 2002. "Job Creation, Job Destruction and the Contribution of Small Businesses: Evidence for UK Manufacturing," Working Papers 461, Queen Mary University of London, School of Economics and Finance.
    9. Addison, John T & Schnabel, Claus & Wagner, Joachim, 2001. "Work Councils in Germany: Their Effects on Establishment Performance," Oxford Economic Papers, Oxford University Press, vol. 53(4), pages 659-694, October.
    10. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1989. "The Growth and Failure of U. S. Manufacturing Plants," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 671-698.
    11. Grotz, Reinhold & Brixy, Udo, 2002. "Entry-rates, the share of surviving businesses and employment growth: differences between West and East Germany since unification," ERSA conference papers ersa02p175, European Regional Science Association.
    12. Matthew Barnes & Jonathan Haskel, 2002. "Job Creation, Job Destruction and the Contribution of Small Businesses: Evidence for UK Manufacturing," Working Papers 461, Queen Mary University of London, School of Economics and Finance.
    13. Michael Fritsch & Antje Weyh, 2006. "How Large are the Direct Employment Effects of New Businesses? An Empirical Investigation for West Germany," Small Business Economics, Springer, vol. 27(2), pages 245-260, October.
    14. Charles Brown & James L. Medoff, 2003. "Firm Age and Wages," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 677-698, July.
    15. Kohaut Susanne & Schnabel Claus, 2003. "Tarifverträge – nein danke!? Ausmaß und Einflussfaktoren der Tarifbindung west- und ostdeutscher Betriebe / Collective Agreements - No Thanks!? Extent and Determinants of Firms’ Bargaining Coverage in," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 223(3), pages 312-331, June.
    16. Audretsch, David B. & van Leeuwen, George & Menkveld, Bert & Thurik, Roy, 2001. "Market dynamics in the Netherlands: Competition policy and the role of small firms," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 795-821, April.
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    Cited by:

    1. Hirsch, Boris, 2007. "Joan Robinson Meets Harold Hotelling : A Dyopsonistic Explanation of the Gender Pay Gap," Discussion Papers 51, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    2. Daniel Fackler & Claus Schnabel & Joachim Wagner, 2013. "Establishment exits in Germany: the role of size and age," Small Business Economics, Springer, vol. 41(3), pages 683-700, October.
    3. Schnabel, Claus & Wagner, Joachim, 2005. "Determinants of Union Membership in 18 EU Countries : Evidence from Micro Data, 2002/03," Discussion Papers 31, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    4. Claus Schnabel & Susanne Kohaut & Udo Brixy, 2011. "Employment stability in newly founded firms: a matching approach using linked employer–employee data from Germany," Small Business Economics, Springer, vol. 36(1), pages 85-100, January.
    5. Peter Thompson & Mihaela Pintea, 2008. "Sorting, Selection, and Industry Shakeouts," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 33(1), pages 23-40, August.
    6. Heckmann, Markus & Schnabel, Claus, 2005. "Überleben und Beschäftigungsentwicklung neu gegründeter Betriebe," Discussion Papers 39, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.

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    More about this item

    Keywords

    Labour turnover; wages; newly founded firms; linked employer-employee data; Germany;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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