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Does Quality Make a Difference?: Employment Effects of High- and Low-Quality Start-Ups

Michael Fritsch and Alexandra Schroeter

No 1128, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper investigates the impact of new firms' quality on the magnitude of their employment effects. Our results clearly show that the quality of start-ups, measured by their affiliation with sectors and innovative industries, strongly influences the direct and the overall employment contribution of new firms. In particular, start-ups in manufacturing industries generate larger direct and overall growth effects than those in services. Moreover, new businesses in innovative manufacturing and in knowledge-intensive service industries make a larger direct contribution to employment than start-ups affiliated with other industries. We also find a relatively strong overall effect of new business formation in knowledge-intensive service industries. However, the impact of start-ups in innovative manufacturing industries on overall regional employment growth is not statistically significant, which may be mainly due to their rather small share in all start-ups and because they impact more on firms and employment in other regions than do start-ups in non-innovative manufacturing. Finally, we discuss the implications for entrepreneurship policy that can be derived from our findings.

Keywords: Entrepreneurship; new business formation; innovative industries; regional development; entrepreneurship policy (search for similar items in EconPapers)
JEL-codes: L26 M13 O1 O18 R11 (search for similar items in EconPapers)
Pages: 31 p.
Date: 2011
New Economics Papers: this item is included in nep-cse, nep-ent, nep-ind, nep-sbm and nep-ure
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Does Quality Make a Difference? Employment Effects of High- and Low-Quality Start-Ups (2011) Downloads
Working Paper: Does Quality make a Difference? Employment Effects of High- and Low-Quality Start-ups (2011) Downloads
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