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Business Cycles and Start-Ups across Industries: An Empirical Analysis of German Regions

Alexander Konon, Michael Fritsch () and Alexander Kritikos ()

No 1732, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We analyze whether start-up rates in different industries systematically change with business cycle variables. Using a unique data set at the industry level, we mostly find correlations that are consistent with counter-cyclical influences of the business cycle on entries in both innovative and non-innovative industries. Entries into the largescale industries, including the innovative part of manufacturing, are only influenced by changes in the cyclical component of unemployment, while entries into small-scale industries, like knowledge intensive services, are mostly influenced by changes in the cyclical component of GDP. Thus, our analysis suggests that favorable conditions in terms of high GDP might not be germane for start-ups. Given that both innovative and non-innovative businesses react counter-cyclically in ‘regular’ recessions, business formation may have a stabilizing effect on the economy.

Keywords: New business formation; entrepreneurship; business cycle; manufacturing; services; innovative industries (search for similar items in EconPapers)
JEL-codes: E32 L16 L26 R11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-eur, nep-ino, nep-mac, nep-sbm, nep-tid and nep-ure
Date: 2018
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Related works:
Journal Article: Business cycles and start-ups across industries: An empirical analysis of German regions (2018) Downloads
Working Paper: Business Cycles and Start-ups across Industries: An Empirical Analysis of German Regions (2018) Downloads
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