Arbeitspapier

The growth and human capital atructure of new firms over the business cycle

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Recent research suggests that employment in young firms is more negatively impacted during economic downturns than employment in incumbent firms. This questions the effectiveness of policies that promote entrepreneurship to fight crises. We complement prior research that is mostly based on aggregate data by analyzing cyclical effects at the firm level. Using new linked employer-employee data on German start-ups we show that under constant human capital of the firms' founders, employment growth in less than 11/2-year old start-ups reacts countercyclically and employment growth in older start-ups reacts procyclically. The young start-ups realize their countercyclical growth by hiring qualified labor market entrants who might be unable to find employment in incumbent firms during crises. This mechanism is highly important in economic and management terms and has not been revealed by prior research.

Language
Englisch

Bibliographic citation
Series: IAB-Discussion Paper ; No. 42/2016

Classification
Wirtschaft
Business Fluctuations; Cycles
Labor Demand
Entrepreneurship
New Firms; Startups
Firm Performance: Size, Diversification, and Scope
Production, Pricing, and Market Structure; Size Distribution of Firms
Firm Behavior: Empirical Analysis
Subject
Firm growth
Entrepreneurship
Business cycle
Crisis

Event
Geistige Schöpfung
(who)
Brixy, Udo
Murmann, Martin
Event
Veröffentlichung
(who)
Institut für Arbeitsmarkt- und Berufsforschung (IAB)
(where)
Nürnberg
(when)
2016

Handle
Last update
10.03.2025, 11:43 AM CET

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Object type

  • Arbeitspapier

Associated

  • Brixy, Udo
  • Murmann, Martin
  • Institut für Arbeitsmarkt- und Berufsforschung (IAB)

Time of origin

  • 2016

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