Start-ups as drivers of market mobility: An analysis at the region-sector level for the Netherlands

Abstract

We investigate the impact of start-up rates on a measure of competition among incumbent firms called market mobility. While recent literature suggests that competition among incumbent firms is caused by (lagged) start-up rates, this relation has not yet been tested using a direct measure of competition among these firms. In the present paper we estimate a regression model, at the region-sector level for the Netherlands, where the mobility rate is explained by (lagged) start-up rates and control variables. Using data for 40 regions and five sectors over the period 1993-2006 we find that the impact of start-ups on market mobility varies by sector. We find a strong positive relation between start-up rates and mobility rates for industry sectors (manufacturing and construction) but an insignificant relation for services sectors. These results suggest there are differences in the types of entry between sectors and in the roles start-ups play in different sectors. �