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Publication date: 4 August 2015

Stefan Schneck and Eva May-Strobl

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…

Abstract

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.

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Entrepreneurial Growth: Individual, Firm, and Region
Type: Book
ISBN: 978-1-78560-047-0

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