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The effect of new firm formation on regional development over time

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  • Fritsch, Michael
  • Mueller, Pamela

Abstract

In our analysis of the impact of new firm formation on regional employment change we identified considerable time lags. We investigated the structure and extent of these time lags by applying the Almon lag model and found that new firms can have both a positive and a negative effect on regional employment. The results indicate that the indirect effects of new firm formation (crowding-out of competitors, improvement of supply conditions and improved competitiveness) are of greater magnitude than the direct effect, i.e., the jobs that are created in the new businesses. The peak of the positive impact of new firms on regional development is reached about eight years after the new firms have been started.

Suggested Citation

  • Fritsch, Michael & Mueller, Pamela, 2004. "The effect of new firm formation on regional development over time," Freiberg Working Papers 2004/01, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
    • Handle: RePEc:zbw:tufwps:200401
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Regional growth; new firms; entrepreneurship; time lags; Regionalentwicklung; Unternehmensgründungen; Entrepreneurship; Time Lags;
    All these keywords.

    JEL classification:

    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • 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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