Are more start-ups really better? Quantity and quality of new businesses and their effect on regional development

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Empirical analyses suggest that the employment creating effect of start-ups is highest in regions with a low level of new business formation and that an increase in the regional start-up rate beyond a certain level may lead to negative employment effect. In explaining these results, we assume that the average quality of regional start-ups decreases with the number of start-ups, while the costs of the induced resource reallocation increase. Our model implies that it is not the number of start-ups but their quality that is decisive for their effect on economic development. Therefore, a policy aiming at stimulating economic growth through entrepreneurship should focus on high-quality start-ups.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Jena Economic Research Papers ; No. 2009,070

Classification and Topics

• Classification: Wirtschaft ; Entrepreneurship ; New Firms; Startups ; Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure ; Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
• Subject: Entrepreneurship ; new business formation ; regional development ; entrepreneurship policy ; Unternehmensgründung ; Unternehmer ; Regionale Entwicklung ; Beschäftigungseffekt ; Unternehmensentwicklung ; Wirtschaftsförderung ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fritsch, Michael ; Schröter, Alexandra
• Event: Veröffentlichung
• (who): Friedrich Schiller University Jena and Max Planck Institute of Economics
• (where): Jena
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/32600