The relationship between start-ups, market mobility and employment growth: An empirical analysis for Dutch regions

Abstract

Recent literature suggests that two types of competition may contribute to macro-economic performance: the extent of new-firm entry and the extent of competition among incumbent firms. In the present paper we explain employment growth at the region-sector level using direct indicators for both these types of competition -the start-up rate and the market mobility rate- as main independent variables. While previous studies in this field measured competition among incumbent firms in an indirect way, we use a direct measure called market mobility. The empirical analysis reiterates existing results in that we find the long-term economic effect of start-ups to be bigger than the short-term effect. We also find empirical indications that this long-term effect consist of two significant parts. First, the most successful start-ups grow out to become high-growth firms, and second, the entry of new firms stimulates incumbent firms to perform better. �