New Business Formation by Industry over Space and Time: A Multi-Dimensional Analysis

Abstract

We apply a multidimensional approach to simultaneously analyze the effects of three groups of determinants on new business formation: industry, space, and changes over time. The data are for West Germany and covers the period from 1983 to 1997. Our analysis indicates that the positive impact of small business employment found in many previous studies may be mainly explained by minimum efficient size in the respective industry. Moreover, innovation activities and the technological regime play an important role in new business formation processes. There are some differences with regard to the impact of a number of variables on start-ups in the manufacturing and the service sector. While a high level of short-term unemployment has a positive impact on the number of start-ups in the service sector, no significant impact for long-term unemployment could be found.