EUR.INST: Creating Firms for a New Century: Determinants of Firm Creation in Southern Germany around 1900

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                ABSTRACTS IN ECONOMIC HISTORY
                    (c) 2000 EH.Net
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Name: Joerg Baten
Email: baten@econhist.vwl.uni-muenchen.de
Institution: Univ. Munich/Germany

Co-author: none

Title: Creating Firms for a New Century: Determinants of Firm Creation in
Southern Germany around 1900

Internet Address of abstracted work:
http://www.vwl.uni-muenchen.de/ls_komlos/joerg.html

By mail:
Department of Economics
Economic History/iv
Ludwigstrasse 33/IV
University of Munich
Munchen D-80539
GERMANY

Language: English

Abstract:
This paper tests the Audretsch and Fritsch's (1994) "seed-bed theory" and
Krugman's (1998) agglomeration theory. The empirical findings are compared
with studies on today's firm creation rates in Europe. A rapidly growing
literature in industrial economics and regional economics uses data sets of
individual firms or regional firm creation rates to answer the central
question: What makes entrepreneurs? Which factors encourage some people to
set up their own business and create jobs, and what prevents potential
entrepreneurs from doing so? This contribution explores the determinants of
regional differences in firm creation rates by using a new data set of 4036
individual firms from Southwest Germany. In a regression analysis, both
agglomeration and seed-bed effects seem to be confirmed. However, the
historical evidence allows in contrast to research on the recent past -
controls for autoregressive effects over time. The results suggest that
both agglomeration and seed bed effects should be respecified: Including a
lagged dependent variable, their proxies are insignificant on the aggregate
level of districts (Amtsbezirke) that is chosen in most studies relating to
the recent past. The significant autoregressi ve term suggests that other
factors are at work, including a 'learning from example' effect: If your
neighbour created a successful firm in the past, you are also more inclined
to do so. However, if cities are chosen as the aggregation level, the
agglomeration and seed bed indicators regain a significant influence, side
by side with the 'learning from example' effect.

Bibliography: Baten, Joerg. "Creating Firms for a New Century:
Determinants of Firm Creation in Southern Germany around 1900." Working
Paper. March, 2000.

Subject: R
Geographical Area: 4
Country/Region: GERMANY
Time Period: 8

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