This chapter utilizes German tax data to present evidence about the direct and indirect effects of new firm formation. Cohort analysis is applied to investigate survival, sales, inputs, and value added of start-up firms. Most dropouts occur in the early years. We show that start-up microenterprises increase economic vitality directly. Sales and value added are in an approximate proportion of 3:1. With respect to the indirect effects of new firms, we find that one Euro of sales induces considerable indirect effects because 66 Cents are used to buy products and services from incumbents. For this reason, new firms substantially promote economic prosperity of incumbents. Sectoral differences are also indicated, with the manufacturing industry generating highest sales and relying most heavily on inputs in the early periods.
We have benefited from comments by Michael Fritsch, Brigitte Günterberg, Marina Hoffmann, Silke Kriwoluzky, Christoph Lamsfuss, Frank Wallau, and participants of the EEA|ESEM 2013 Congress. Thanks to Rafael Beier for assistance with data issues. We are indebted to the editor, Jerome Katz, for very helpful suggestions. Both on-site and remote data access were provided by the Research Data Centre (FDZ) of the German Statistical Office (Destatis). Any remaining errors are our own. The authors declare that we have no conflict of interest.
Schneck, S. and May-Strobl, E. (2015), "The Economic Contribution of Start-Up Firms in Germany", Entrepreneurial Growth: Individual, Firm, and Region (Advances in Entrepreneurship, Firm Emergence and Growth, Vol. 17), Emerald Group Publishing Limited, pp. 231-263. https://doi.org/10.1108/S1074-754020150000017014Download as .RIS
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