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Small firm entry in manufacturing industries: Lower Saxony, 1979–1989

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Abstract

This paper is an empirical study of inter-industry and inter-temporal variations in entry of new firms using longitudinal data covering all manufacturing establishments in Lower Saxony between 1979 and 1989. Patterns of entry are reported for 29 industries based on numbers of new firms, gross rates of entry, and entry intensities (shares of employees) in different types and size classes of new firms. Entry varies considerably between firm types, industries, and over time. Focussing on entry by small single firms an empirical model is applied to search for industry characteristics that are highly correlated with entry. Pooling of cross-section and time-series data allows to control for influences of varying macroeconomic conditions and unobserved industry characteristics. A highly robust estimation method is applied for the first time in a study of entry rates, and it turns out that extreme observations often have large effect on the results. Entry intensity tends to be positively related to industry growth, concentration, and high unemployment, but negatively to high interest rates, profits, and (insignificantly) to intensive use of capital and R&D. I plead for further research vialearning by asking those who are doing.

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Authors and Affiliations

  1. Institute for Quantitative Economic Research, University of Hannover, Wunstorfer Straße 14, 3000, Hannover 91, Germany

    Joachim Wagner

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  1. Joachim Wagner
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Additional information

This paper is part of the research project “Production, Employment Growth, and Exports by Lower Saxonian Firms”. The computations based on the establishment level data from the official surveys of the manufacturing sector were made possible by a special arrangement between the Ministry of Economics, the Statistical Office, and the Labor Research Group at the Department of Economics, Hannover University. I thank Uwe Rode from the Lower Saxonian Statistical Office for preparing the longitudinal establishment level data base. Financial support from research funds provided by the state of Lower Saxony is gratefully acknowledged.

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Wagner, J. Small firm entry in manufacturing industries: Lower Saxony, 1979–1989. Small Bus Econ 6, 211–223 (1994). https://doi.org/10.1007/BF01108289

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