Foundations and Trends® in Entrepreneurship > Vol 9 > Issue 3

New Business Formation and Regional Development: A Survey and Assessment of the Evidence

Michael Fritsch, Friedrich Schiller University Jena, School of Economics and Business Administration, Germany, m.fritsch@uni-jena.de
 
Suggested Citation
Michael Fritsch (2013), "New Business Formation and Regional Development: A Survey and Assessment of the Evidence", Foundations and TrendsĀ® in Entrepreneurship: Vol. 9: No. 3, pp 249-364. http://dx.doi.org/10.1561/0300000043

Published: Feb 13, 2013
© 2013 M. Fritsch
 
Subjects
Business formation,  Corporate entrepreneurship,  Firm ownership,  Government programs and public policy,  High technology,  Nascent and start-up entrepreneurs,  Opportunity recognition,  Small business and economic growth,  Industrial Organization,  Economic Theory,  Public policy
 
Keywords
L26 EntrepreneurshipM13 New Firms/Start-upsO1 Economic developmentO18 Urban, Rural, Regional and Transportation AnalysisR11 Regional Economic Activity
EntrepreneurshipNew business formationEmploymentRegional development
 
 
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In this article:
1 The Link Between New Business Formation and Growth
2 Emergence of the Research Field
3 Theory: The Role of Entrepreneurship in Economic Development
4 Results of Empirical Research
5 Implications for Entrepreneurship Policy
6 Avenues for Further Research
7 Final Remarks
Acknowledgments
References

Abstract

This monograph reviews the current state of knowledge about the effects of new business formation on regional development. These effects are diverse and include the creation and destruction of employment, introduction of innovations, structural change, and increasing productivity, among others. Theory particularly emphasizes the role that some new businesses play in the diffusion of knowledge and innovation as drivers of economic growth. I provide an explanatory approach that highlights the competitive challenge that start-ups pose to incumbent firms and discuss important implications. The overview of empirical research particularly deals with the development of start-up cohorts, identification of different types of indirect effects and their magnitude, differences based on characteristics of entry, and regional variation. A general conclusion is that the diverse indirect effects of new business formation on development are much more important than the growth effects created by newcomers. The diverse indirect effects of entry on development are currently less than fully understood. Finally, I draw conclusions for policy and put forward a number of important questions for further research.

DOI:10.1561/0300000043
 
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Table of contents:
The Link Between New Business Formation and Growth
Emergence of the Research Field
Theory: The Role of Entrepreneurship in Economic Development
Results of Empirical Research
Implications for Entrepreneurship Policy
Avenues for Further Research
Final remarks
References

New Business Formation and Regional Development: A Survey and Assessment of the Evidence

New Business Formation and Regional Development provides an overview of the effects that new businesses have on regional development. The focus is on regions because geographical units of observation are much better suited for such an analysis than are industries. Regional growth is a complex process that involves large numbers of start-ups in diverse industries, firm exit, and growing and declining incumbent firms. The determinants of the effects that new business formation has in this complex process may be different from those factors that make individual start-ups succeed or a fail. After an introductory explanation, section 2 begins with a brief sketch of the extant research on this topic. Section 3 reviews the main theoretical approaches that provide insights and explanations, and combines them in a more diverse and comprehensive explanation of the effects of start-ups on development. This eclectic approach particularly highlights the competitive challenge that start-ups pose to incumbent firms and the important role played by the regional environment. Section 4 reports the available empirical evidence on the different effects that new business formation might have on regional development. The research ends with a discussion of policy implications in Section 5, and outlining important questions for further research in Section 6.

ISBN:978-1-60198-640-5 E-ISBN:978-1-60198-641-2 DOI:10.1561/9781601986412