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SBE Lect 4_ Part 2: Ch6 defining and measuring start ups (The impact of…
SBE Lect 4_ Part 2: Ch6 defining and measuring start ups
The impact of new businesses on employment creation
II: Decline or closure of incumbents
◦
Displacement effect
III: Securing efficiency (competitiveness) ◦
Induced effect
I: Development of new businesses
◦
Direct effect
slide 7
Lags so go back in time I, II, III are the three stages
slide 8-9: can we empirically observe this curve?
--> Change in employment, as a function of start-up rate
Competition (selection) is central in explaining this curve
Do you expect stronger or weaker effects in regions with a high level of entrepreneurship?
When there is a high level of entrepreneurship the effects there will be intense competion so very efficient because losers exit so effects are stronger
Intuition
Areas with a high density of economic activity experience more intense competition
The higher the level of competition, the stronger the selection of efficient businesses
Hence, we may expect stronger effects in regions with high levels of entrepreneurship
Impact of new businesses on employment creation
slide 9-10/31
entrepreneurship UK>Scotland
High population density = more economic activity= stronger competition
UK net effect is positive but other cases where entrepreneurship is not that high (need a sufficient amount of competition)
Defining the new business
A new business is new
transacting
entity that did
not
exist in a previous time period, is
not
owned by an existing business, and is not a simple change of ownership
New businesses are important, but how are they defined?Individuals starting a business vs. a
new business
Make sure you are able to judge, based on this definition, whether a businesses can be seen as a new business or not
Example
See slide 11-14
Putting the definition at work
Unfortunately, also for counting new businesses, we have to work with proxy variables
Five well-known measures of the new
business
The number of new business bank accounts opened (banks)
Individuals who say they have started a new business (survey, e.g., GEM)
The number of new companies (ltd) registered (tax authority)
Individuals who move into self-employment, who were not previously in self- employment (tax authority)
The number of new enterprises registered (e.g., chamber of commerce)
see comparison slide 15/31