Local networks and new business formation

Füner, Lena ; Berger, Marius ; Bersch, Johannes ; Hottenrott, Hanna

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URN: urn:nbn:de:bsz:180-madoc-666209
Document Type: Working paper
Year of publication: 2023
The title of a journal, publication series: ZEW Discussion Papers
Volume: 23-067
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
Business School > Dekanat Betriebswirtschaftslehre
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: L14 , L26 , M13 , O31,
Keywords (English): new firm formation , business networks , serial entrepreneurship , regional dynamics, ownership concentration
Abstract: New business formation is a key driver of regional transformation and development. While we know that a region’s attractiveness for new businesses depends on its resources, infrastructure, and human capital, we know little about the role of local business networks in promoting or impeding the birth of new firms. We construct local business networks connecting more than 350 million nodes consisting of managers, owners and firms using administrative data on all German businesses from 2002 to 2020. Differentiating between serial and de-novo entrepreneurs, we show a positive but decreasing relation between a region’s connectedness and firm entry of serial entrepreneurs. Networks are, moreover, positively linked to firm survival. Relating our findings to a measure of ownership concentration, we show that networks provide additional explanations for regional variation in new business formations. These patterns are robust to synthetic instrumental variable estimations

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