Employment Growth Determinants in New Firms in Eastern Germany

The unification of both Germanies and the introduction of the market economy in eastern Germany came as a shock to existing firms and led to an enormous boom in the establishment of new firms. The first section of this paper shows that during the period under observation (January 1991--June 1995) the number of firms nearly doubled and in 1995, nearly 50% of all jobs were to be found in firms established after 1991. Shortly after unification, a kind of "start- window" existed during which the conditions for establishment, growth and survival of firms were extraordinarily good. The next section deals with the determinates of the growth of these newly founded firms. Most determinants have been selected on the basis of the most recent studies by Brüderl, Preisendörfer and Ziegler (1996), and Storey (1994). The analysis included not only establishment characteristics but also strategic factors such as the technological status of the establishment, the proportion of sales in interregional markets, and a corporate competitive strategy indicator. A comparison of these results with other studies shows that the determinants that affect employment growth in new firms in eastern German are apparently the same as in western Germany and Britain, albeit to different extents.     

Do Newly Founded Firms Pay Lower Wages? First Evidence from Germany

Using a linked employer–employee data set for Germany, this paper analyses wage setting in a cohort of newly founded and other establishments from 1997 to 2001. While theory provides alternative explanations for higher or lower wages in newly founded firms, we show empirically that start-ups tend to pay lower wages, ceteris paribus. On average, wages in newly founded establishments are 8% lower than in similar incumbent firms. This negative wage differential is substantially smaller in eastern than in western Germany. The wage differential is shown to decline over time as the newly founded firms become more mature.     

New firm survival: the interdependence between regional externalities and innovativeness

Small Business Economics - Many studies have shown that regional externalities play a crucial role for the survival prospects of newly founded companies. However, recent research provides evidence...     

Regional characteristics,opportunity perception and entrepreneurial activities

This article seeks to better understand the link between regional characteristics and individual entrepreneurship. We combine individual-level Global Entrepreneurship Monitor data for Western Germany with regional-level data, using multilevel analysis to test our hypotheses. We find no direct link between regional knowledge creation, the economic context and an entrepreneurial culture on the one side and individual business start-up intentions and start-up activity on the other side. However, our findings point to the importance of an indirect effect of regional characteristics as knowledge creation, the economic context and an entrepreneurial culture have an effect on the individual perception of founding opportunities, which in turn predicted start-up intentions and activity.     

The Selectiveness of the Entrepreneurial Process

This paper focuses on the phase before a firm is founded. Based upon cross‐sectional data from the German section of the Global Entrepreneurship Monitor, the specific aims of the paper are to shed some light on the selection that takes place during the entrepreneurial process and to explain empirically the demographic and cognitive characteristics of (potential) entrepreneurs. The results reveal significant differences between common determinants of the different phases of the entrepreneurial process.     

The Effect of Industry, Region, and Time on New Business Survival – A Multi-Dimensional Analysis

We analyze the effect of industry, region, and time on new business survival rates by means of a multi-dimensional approach. The data relate to West German districts in the 1983–2000 period. The survival chances of start-ups tend to be relatively low in industries characterized by a high minimum efficient size and high numbers of entries. We find that regional characteristics play a rather important role and that introducing the regional dimension leads to considerable improvements of the estimation results. The significance of the regional dimension is also reflected in a remarkably high level of neighborhood effects.     

Employment stability in newly founded firms: a matching approach using linked employer–employee data from Germany

Using a linked employer–employee dataset and taking the perspective of individuals rather than firms, this paper analyzes some effects of joining startups. We show that entrants in new firms differ from those joining incumbent firms, and we use a matching approach to compare a group of employees joining new firms in 1995/1996 with a control group entering incumbent firms. Our results indicate that individuals’ employment stability was higher in incumbent than in newly founded firms, while their risk of becoming unemployed was lower. In particular in eastern Germany, joining firms that were older than 6 years improved individuals’ employment prospects.