How Fast Do Newly Founded Firms Mature?

Abstract

Economic policy in Germany strongly stimulates the founding of new firms, not least because politicians hope that new firms may create the additional employment that is so desperately needed in Germany. In order to find out whether this is really the case and how successful new firms are, a growing empirical literature has studied the performance of new firms at various levels of aggregation. At the micro level, i.e. using data of individual firms or establishments, quite a few studies have been published in the last decade that analyze the success of newly founded firms over the years in terms of survival rates, employment growth, and other indicators of firm performance (see, e.g., Wagner, 1994; Bruderl et al., 1996; Brixy and Kohaut, 1999; Almus, 2002). From a macro perspective, using the concepts of job creation, job destruction and job turnover, a number of studies have tried to identify the extent to which new firms contribute to aggregate employment growth (see, e.g., Boeri and Cramer, 1991; Bellmann et al, 1996; Gerlach and Wagner, 1997; Turk 2002; Brixy and Grotz, 2004).¹

The authors would like to thank the Deutsche Forschungsgemeinschaft for financial support under project SCHN-730/2-1. Helpful comments on previous versions of this paper by Joachim Wagner, two anonymous referees, the participants in the DFG program workshop in Mannheim and the participants in seminars at the Institut der deutschen Wirtschaft Köln and the University of Regensburg are gratefully acknowledged. The usual disclaimer applies.