Local networks and new business formation

Lena Füner, Marius Berger, Johannes Bersch and Hanna Hottenrott

No 23-067, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: New business formation is a key driver of regional transformation and development. While we know that a region's attractiveness for new businesses depends on its resources, infrastructure, and human capital, we know little about the role of local business networks in promoting or impeding the birth of new firms. We construct local business networks connecting more than 350 million nodes consisting of managers, owners and firms using administrative data on all German businesses from 2002 to 2020. Differentiating between serial and de-novo entrepreneurs, we show a positive but decreasing relation between a region's connectedness and firm entry of serial entrepreneurs. Networks are, moreover, positively linked to firm survival. Relating our findings to a measure of ownership concentration, we show that networks provide additional explanations for regional variation in new business formations. These patterns are robust to synthetic instrumental variable estimations

Keywords: New Firm Formation; Business Networks; Serial Entrepreneurship; RegionalDynamics; Ownership Concentration (search for similar items in EconPapers)
JEL-codes: L14 L26 M13 O31 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ent, nep-eur, nep-geo, nep-ino, nep-net, nep-sbm, nep-tid and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:283589

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