Determinants of regional entrepreneurship dynamics in contemporary Germany: A conceptual and empirical analysis

Abstract

Tamásy C. (2006) Determinants of regional entrepreneurship dynamics in contemporary Germany: a conceptual and empirical analysis, Regional Studies 40, 365–384. The importance of entrepreneurship for the development of national and regional economies is widely recognized. Although politicians in Germany are aware of entrepreneurship, their practices cannot rely on a generally accepted theory of entrepreneurship. The paper develops a holistic conceptualization of regional entrepreneurship dynamics and investigates empirically determinants of start-up activities and new business success in selected German regions. It uses two primary data sets explicitly designed to analyse regional entrepreneurship dynamics in contemporary Germany. The research project ‘Regional Entrepreneurship Monitor’ focuses on determinants of start-up activities in the pre-entry phase of entrepreneurial processes, while the ‘New Firm Survey’ examines factors influencing post-entry firm success. The paper suggests holistic approaches in entrepreneurship research are necessary, because entrepreneur-associated factors, characteristics of the newly founded firm and the geographical environment influence entrepreneurial processes. These determinants can have direct or indirect influences on entrepreneurial processes. The results suggest that politicians and policy-makers need to pay special attention to entrepreneurial attitudes and behaviours if they wish to boost regional entrepreneurship dynamics in Germany.

Tamásy C. (2006) Les déterminants de la dynamique entrepreneuriale régionale dans l'Allemagne contemporaine: une analyse conceptuelle et empirique, Regional Studies 40, 365–384. L'importance de l'esprit d'entreprise pour le développement des économies nationales et régionales est bien reconnue. Quoique les hommes politiques en Allemagne soient conscients de l'esprit d'entreprise, leurs procédures ne reposent pas sur une théorie reçue qui embrasse l'esprit d'entreprise. Cet article cherche à développer une approche conceptuelle holistique de la dynamique entrepreneuriale régionale et examine de façon empirique les déterminants de la création d'entreprise et de la réussite des nouvelles entreprises dans certaines régions d'Allemagne. On se sert de deux banques de données primaires spécialement conçues pour analyser la dynamique entrepreneuriale régionale dans l'Allemagne contemporaine. Le projet, intitulé ‘Regional Entrepreneurship Monitor’ (‘Le Moniteur de l'Esprit d'entreprise Régional’), porte sur les déterminants de la création d'entreprise dans les premières phases des démarches entrepreneuriales, tandis que la ‘New Firm Survey’ (‘L'Enquête auprès des Nouvelles Entreprises’) examine des facteurs qui influent sur la réussite des entreprises dans les phases ultérieures. L'article laisse supposer que des façons holistiques soient nécessaires à la recherche de l'esprit d'entreprise parce que les facteurs qui s'associent à l'entrepeneur, les caractéristiques de l'entreprise nouvellement créée, et le milieu local influent sur les démarches entrepreneuriales. Ces déterminants peuvent influer sur les démarches entrepreneuriales de façon directe ou indirecte. Les résultats laissent supposer que les hommes politiques et les décideurs devraient porter un intérêt particulier aux esprits et aux comportements d'entreprise s'ils cherchent à donner du tonus à la dynamique entrepreneuriale régionale en Allemagne.

Dynamique entrepreneuriale régionale, Création, d'entreprise, Réussite des nouvelles entreprises, Déterminants, Allemagne

Tamásy C. (2006) Bestimmende Faktoren regionaler Unternehmertumsdynamik im heutigen Deutschland: Eine konzeptionelle und empirische Analyse, Regional Studies 40, 365–384. Die Bedeutung des Unternehmertums für die Entwicklung von Volks- und Regionalwirtschaften wird allgemein anerkannt. Obschon Politiker in Deutschland sich der Bedeutung des Unternehmertums bewußt sind, können sich ihre Praktiken nicht auf eine allgemein anerkannte Theorie des Unternehmertums stützen. Dieser Aufsatz entwickelt eine holistische Konzeptualisierung regionaler Dynamik des Unternehmertums und untersucht ausschlaggebende Faktoren für Gründungsaktivitäten und Gründungserfolg in ausgewählten deutschen Regionen auf empirische Weise. Es werden zwei Datensätze benutzt, die speziell dazu entworfen wurden, die regionale Unternehmensdynamik im heutigen Deutschland zu analysieren. Das Forschungsprojekt ‘Regionaler Entrepreneurship Monitor’ konzentriert sich auf bestimmende Faktoren der Gründungsaktivität in der Vorgründungsphase unternehmerischer Prozesse, während der ‘New Firm Survey’ Faktoren prüft, die den Erfolg der Firma nach Markteintritt beeinflussen. Der Aufsatz vertritt die Meinung, daß holistische Ansätze zur Unternehmertumsforschung nötig sind, weil mit Unternehmern verbundene Faktoren, Eigenschaften neu gegründeter Firmen und die geographische Umgebung unternehmerische Prozesse beeinflussen. Die bestimmenden Faktoren können direkt oder indirekt Einfluss auf unternehmerische Prozesse ausüben. Die Ergebnisse legen damit nahe, daß Politiker und politische Entscheidungsträger Verhalten und Einstellungen der Unternehmer besondere Aufmerksamkeit zollen müssen, wenn sie die regionale Dynamik des Unternehmertums in Deutschland fördern wollen.

Regionale Dynamik des Unternehmertums, Gründungsaktivitäten, Erfolge neuer Unternehmen, bestimmende Faktoren, Deutschland

Tamásy C. (2006) Determinantes de las dinámicas del empresariado en regiones de la Alemania contemporánea: Un análisis conceptual y empírico, Regional Studies 40, 365–384. La importancia del empresariado para el desarrollo de economías nacionales y regionales es bien reconocida. Aunque los políticos en Alemania conocen el concepto del empresariado, a sus métodos le falta una base teórica generalmente aceptada del empresariado. En este artículo sostengo una conceptualización holística de las dinámicas regionales con respecto al empresariado y analizo empíricamente cuáles son los determinantes de las actividades de preparación y el éxito de los nuevos negocios en varias regiones alemanas. Para ello uso explícitamente dos grupos de datos primarios creados para analizar las dinámicas regionales en cuanto al empresariado en la Alemania contemporánea. El proyecto de investigación ‘observación del empresariado regional’ se centra en los determinantes de actividades de inicio en la fase previa a la entrada de los procesos empresariales mientras que el ‘Estudio sobre Empresas Nuevas’ examina qué factores influyen para el éxito de una empresa después de la entrada. Con este ensayo expongo que son necesarios planteamientos holísticos en el estudio del empresariado porque los factores asociados a los empresarios, las características de las empresas recién fundadas y el ambiente geográfica influyen en los procesos empresariales. Estos determinantes pueden tener una influencia directa o indirecta en los procesos empresariales. Los resultados indican que si los políticos y los responsables políticos desean estimular las dinámicas regionales en el empresariado de Alemania deben preocuparse especialmente por las actitudes y conductas empresariales.

Dinámicas regionales para el empresariado, Actividades de inicio, Éxito de nuevas empresas, Determinantes, Alemania

Keywords:

• Regional entrepreneurship dynamics
• Start-up activities
• New business success
• Determinants
• Germany

Acknowledgements

The paper strongly benefited from comments by Richard Le Heron.

Notes

1. See http://www.bmwa.bund.de/Navigation/existenz gruender.html; author's own translation.

2. See http://www.bmwa.bund.de/Redaktion/Inhalte/Pdf/br-infoletter-gruenderzeiten-nr-01,property = pdf.pdf; author's own translation.

3. ‘The first success of a firm is that it becomes one’ (Van Gelderen et al., 2001, p. 80).

4. Researchers have to be careful to avoid ecological fallacies, which mean that relationships for groups do not necessarily hold for individuals (Robinson, 1950). For example, if regions with more unemployed people tend to have higher firm birth rates, then the unemployed must not be more likely to start a new business. This inference may be correct, but is only weakly supported by the aggregate data.

5. The surveys were part of two research projects mainly financed by the German Research Foundation (DFG) under Grants Nos Ste 628/7-1, Wa 610/2-1 (Rolf Sternberg, Joachim Wagner; REM) and Ta 277/1-1 (Christine Tamásy; NFS). For further information about REM and the New Firm Survey, see the detailed discussions in Bergmann (2004; REM) and Tamásy (2005; REM, NFS).

6. The German team works at the Department of Economic and Social Geography, University of Cologne (for the latest national report Germany, see Sternberg and Lückgen, 2005).

7. The New Firm Survey used the Mannheim Foundation Panel as a sampling frame, e.g. to obtain addresses for the survey.

8. For example, one assumption is that age has direct and indirect effects on start-up activities. The suggestion is that age has a direct effect on start-up activities. However, indirect effects of age on start-up activities are also proposed, because age affects entrepreneurial attitudes, which in turn affect start-up activities.

9. The cross-sectional survey design of REM allows no conclusions to be made about the medium- or long-term success rates of nascent entrepreneurs.

10. The roles played by gender, age (measured in years, but also included in squares to test for non-linear effects) and general human capital (measured by the level of schooling, where higher education means the interviewee has obtained at least a secondary school-level certificate) is analysed. If non-employment or unemployment act as push factors into self-employment is tested with two dummy variables. Furthermore, the model includes two firm-specific human capital variables. First, a dummy variable takes into account if the interviewee is self-employed, possibly in addition to his or her current start-up activity. Second, a dummy variable considers if the interviewee started a business in the past that failed (former self-employment). In addition, a dummy variable records the existence of role models for self-employment if so stated by respondents. The survey asked whether the interviewee personally knows someone who started a business during the last 2 years.

11. The interviewees were asked to value three statements with ‘yes’ or ‘no’: ‘You have the knowledge, skill and experience required to start a business’; ‘in the next six months there will be good opportunities for starting a business in the region where you live’; and ‘fear of failure would prevent you from starting a business’.

12. Market entry refers to the point in time when businesses receive their first turnover.

13. In the present paper, a closure is defined as that point in time when a firm exits the market and closes all operations permanently. Thus, selling a firm, a corporate merger, changing the legal form of a company or temporary close-downs are facts that do not count as closures.

14. In addition, an average of 1.6 owners per firm (median = 1.0) were actively conducting a business in the year of founding.

15. The roles played by initial size (turnover, start capital) and type of firm foundation (full-time business versus part-time business, new foundation versus firm take-over) are analysed. Spin-off firms can be defined as the transfer of parts of a company, university or research institution into a new business that has been founded for this purpose. Another potential determinant of entrepreneurship is whether the firm started as a partnership business. Furthermore, the model includes one variable indicating whether a firm is a head office with subsidiaries. A legal form distinguishes between limited liability companies on the one hand and businesses without limitation of liability on the other. Organizational change refers to important structural reorganizations during entrepreneurial processes. The last two firm characteristics refer to the importance of planning (written business plan) and to the information whether or not the firms have had R&D and innovation activities.

16. Age and gender are two personal attributes included in the multivariate analyses. Whether entrepreneurs had been pushed into self-employment is again tested with two dummy variables. Necessity makes sure entrepreneurs pursue start-ups because they have – in their opinion – ‘no better choices for work’, but are not necessarily unemployed or non-employed when they started the considered businesses. The other five variables: level of schooling, level of education, industry-specific experience, management experience and type of entrepreneur, are human capital variables. Again, general human capital is measured by the level of schooling. Whether the respondents have a university degree is tested with an additional dummy variable. Industry-specific experience and management experience are two dummy variables indicating whether the founders had prior experience in the new firms' industry or in supervising employees. Based on the complete self-employment history of founders, all experiences with new firm formation have been added, while multiple entrepreneurs have tried to start a firm at least twice (successful or not). Finally, a dummy variable records the existence of self-employed parents as role models for entrepreneurship if so stated by respondents.

17. The NFS asked the founders to value 21 entrepreneurial framework conditions by using a five-point scale from ‘bad’ (1) to ‘very good’ (5). By using second-order confirmatory factor analysis, a comprehensive model was developed. The final LISREL solution consisted of two entrepreneurial climate indices considering five factors integrating 13 single-framework conditions. The first entrepreneurial climate index characterizes governmental assistance for new firms in the respective region, regulations, bureaucracy and the availability of outside capital. The second index describes the regional economic environment, e.g. the availability of clients, suppliers, subcontractors, consultants and the physical infrastructure (for a detailed model description, see Tamásy, 2005).

18. However, the third model extension does not improve the nested Model 2 at a statistically significant level.

19. More precisely, analyses focused on the average annual productivity growth between the first completed business year after market entry and 2001, which is related to the efficiency of goods and services. As a result of methodical considerations, productivity growth was transferred into a binary variable (for model assumptions of linear regression analysis, see Baltes-Götz, 1999).

20. Growth analyses consider only firms that entered their markets in 1994, 1995 or 1996 (85.3% of the total sample) to control for the heterogeneity of data. For the same reasons mentioned above, the discussion is focused on Model 3. Again, Model 3 does not improve the nested Model 2 at a statistically significant level. Model 2 makes an improvement to Model 1 that is statistically significant at the 10% level.

21. Again, analyses considered firms that entered their markets in 1994, 1995 or 1996.

22. Turnover in the first completed year after market entry strongly correlates with turnover in 2001 (r (Pearson) = 0.8), so that size in general and not initial size in particular is important for subjective success.

23. Multivariate analysis, not displayed herein, shows that the effect cannot be explained by some other variables (Tamásy, 2005). The role played by the geographical environment was investigated in a logistic regression model with a dummy variable taking a value of 1 if a person is a multiple entrepreneur, and zero otherwise (a single entrepreneur). Alongside the regional dummies (Cologne, Stuttgart), the model focused on entrepreneur-associated factors only as independent variables: age, gender, citizenship, self-employed parents, necessity entrepreneur, unemployment or non-employment, industry-specific experience, management experience, four dummies for graduation, and five dummies for professional career.