Determinants and Economic Effects of New Firm Creation: Evidence from Polish Regions

Gajewski, Paweł; Kutan, Ali M.

doi:10.1080/00128775.2018.1442226

Cited by 12 publications

(22 citation statements)

References 49 publications

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“…Meaning firm births communicate economic value which incentivises more related firm births. Alternatively, firm births could increase consumer demand through income effects resulting in more firm births (Gajewski and Kutan, 2018; Sutaria and Hicks, 2004). Future firm births are reduced by previous firm deaths in related sectors (multiplier effect) providing partial support for H2c.…”

Section: Resultsmentioning

confidence: 99%

“…Firstly, we estimate a model similar to the models used by Arcuri et al. (2019) and Gajewski and Kutan (2018) examining how future firm birth/death activity ( t ) is determined by past firm birth or death activity ( t-1 ) with no emphasises on relatedness/unrelatedness. This model is estimated below in equations (7) and (8).…”

Section: Methodsmentioning

confidence: 99%

“…However, income effects provide a conceptual argument for multiplier effects occurring across any industry. Income effects occur when firm births increase levels of income/demand and thus increase future firm births (and decrease future firm deaths) to meet this new level of demand (Gajewski and Kutan, 2018;Sutaria and Hicks, 2004). The same process can increase future firm deaths (and decrease future firm births) as a result of firm deaths lowering income/demand.…”

Section: Multiplier Effects and Relatednessmentioning

confidence: 99%

“…However, economic theory suggests relatedness could influence both the competition and multiplier effect. Beginning with the competition effect, this stipulates that firm births can increase future firm deaths via competitive pressures (Gajewski and Kutan, 2018). The level of similarity between firms is considered a key factor in determining rivalry (Dejardin, 2004).…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

The role of relatedness in firm interrelationships

O'Leary,

Doran,

Power

2023

JES

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PurposeThis paper analyses how firm births and deaths are influenced by previous firm births and deaths in related and unrelated sectors. Competition and multiplier effects are used as the theoretical lens for this analysis.Design/methodology/approachThis paper uses 2008–2016 Irish business demography data pertaining to 568 NACE 4-digit sectors within 20 NACE 1-digit industries across 34 Irish county and sub-county regions within 8 NUTS3 regions. A three-stage least squares (3SLS) estimation is used to analyse the impact of past firm deaths (births) on future firm births (deaths). The effect of relatedness on firm interrelationships is explicitly modelled and captured.FindingsFindings indicate that the multiplier effect operates mostly through related sectors, while the competition effect operates mostly through unrelated sectors.Research limitations/implicationsThis paper's findings show that firm interrelationships are significantly influenced by the degree of relatedness between firms. The raw data used to calculate firm birth and death rates in this analysis are count data. Each new firm is measured the same as another regardless of differing features like size. Some research has shown that smaller firms have a greater propensity to create entrepreneurs (Parker, 2009). Thus, it is possible that the death of differently sized firms may contribute differently to multiplier effects where births induce further births. Future research could seek to examine this.Practical implicationsThese findings have implications for policy initiatives concerned with increasing entrepreneurship. Some express concerns that public investment into entrepreneurship can lead to “crowding out” effects (Cumming and Johan, 2019), meaning that public investment into entrepreneurship could displace or reduce private investment into entrepreneurship (Audretsch and Fiedler, 2023; Zikou et al., 2017). This study’s findings indicate that using public investment to increase firm births could increase future firm births in related and unrelated sectors. However, more negative “crowding out” effects may also occur in unrelated sectors, meaning that public investment which stimulates firm births in a certain sector could induce firm deaths and crowd out entrepreneurship in unrelated sectors.Originality/valueThis paper is the first in the literature to explicitly account for the role of relatedness in firm interrelationships.

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Section: Resultsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Multiplier Effects and Relatednessmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The role of relatedness in firm interrelationships

O'Leary,

Doran,

Power

2023

JES

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“…From a macro-level point of view, the entry of new firms facilitates a reallocation of production factors and structural adjustments in the economy. Economic development is stimulated when the creation of new companies triggers flows from the less productive to the more productive sectors [26]. Furthermore, a higher dynamic in new establishments may amplify boom periods or spur economic recovery during a recession [21].…”

Section: Introductionmentioning

confidence: 99%

Unemployment and Enterprise Births in European Countries: A Sectoral Approach

Wosiek

2023

Sustainability

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Different types of entrepreneurial activities are more or less conducive to socio-economic development. Among others, opportunity entrepreneurs are found to have a greater impact on economic growth, innovation, and employment compared to necessity entrepreneurs (pushed by the risk of being unemployed). In this context, the main goal of the study is to find the answer to the following research question: Which business sectors in European countries are sensitive to the unemployment push effect and thus more prone to necessity entrepreneurship? The paper provides further insight into the unemployment push hypothesis by investigating this issue in the group of 20 European countries across 11 business sectors (NACE Rev. 2 classification): manufacturing, construction, and services of business economies (nine sectors). The issue is examined by analyzing Eurostat and World Bank data for 2004–2020 using the panel vector autoregression (p-VAR) approach. The results confirm the unemployment push effect only in wholesaling, retailing, and repair services. The effect, however, seems to be triggered by entry behaviors in the Central Eastern European countries, which are more active in creating new businesses and more prone to necessity entrepreneurship. In addition, the interplay between unemployment and new enterprise dynamics in wholesaling, retailing, and repair services seems to be relatively more robust to existing heterogeneity within entrepreneurs, countries, and estimation techniques. The implications of the results could assist policymakers responsible for active labor market instruments promoting entrepreneurial attitudes.

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Firm interrelationships: the role of firm size

O’Leary

2024

Lett Spat Resour Sci

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This paper put’s forward a working conceptualisation for how the size of firms which die influences firm interrelationships where firm deaths influence future firm births. Two conceptual arguments are developed to explain the role of firm size in influencing future firm births; the resource argument and the consumer demand argument. This relationship is also empirically tested using a multilevel model to examine the relationship between the death of differently-sized firms and future firm births in European NUTS 3 regions. Findings suggest that only the deaths of larger firms appears to increase future firm births. The resource-based argument is used to explain this finding whereas the consumer demand-based argument is used to explain why the death of smaller firms seems to reduce future firm births. The dataset used in this paper’s estimation captures a large amount of activity across 14 countries and 502 NUTS 3 regions from 2008 to 2019.

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Determinants and Economic Effects of New Firm Creation: Evidence from Polish Regions

Cited by 12 publications

References 49 publications

The role of relatedness in firm interrelationships

The role of relatedness in firm interrelationships

Unemployment and Enterprise Births in European Countries: A Sectoral Approach

Firm interrelationships: the role of firm size

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