In recent years, the importance of business sector start-ups for a country’s economic prosperity has been emphasised in economic and political discourse. It is argued that the foundation of firms has a considerable influence on the intensity of competition at the national level, firms’ innovativeness and their competitiveness in international markets. Because of these effects, start-ups have a substantial bearing on the way that economic structures change and affect the development of employment and income.
Germany is currently in a phase of demographic transition, with the age cohorts that traditionally tended to start businesses set to decline markedly in the medium term. Changes are needed to maintain current levels of start-up activity in the economy. Either more entrepreneurs must emerge from traditionally more reticent age groups, or structures within the education system must be altered to better stimulate start-ups, or regulatory changes must be undertaken to lower formal and administrative hurdles to foundation. A combination of these changes would also have the desired effect.
This project aims to identify determinants of start-up activity, i.e. the characteristics (age, level of education, choice of industry) and the surrounding conditions (market entry barriers, economic environment), which motivate individuals to start a business. From the findings, it will be possible to draw conclusions about how the characteristics and circumstantial parameters must change to make people more willing to choose self-employment. The age groups traditionally more likely to start businesses are making up an ever smaller share of the total population. This research aims to quantify the actual effect that this decline is having on start-ups. Other factors that affect foundation will also be investigated, for example importance of entrepreneurs’ educational qualifications, the range of disciplines represented in the founding team and the relevance of industry-specific competitive conditions and regulations. This will provide a basis from which recommendations for economic policy can be derived. These include possible changes to educational policy, framework conditions or market entry barriers, which could increase the proportion of self-employed individuals and ensure the survival of existing firms in the face of a declining, ageing population.
This project will build upon the research conducted to date in the scope of the project “Firm dynamics and the demographic transition – microsimulation modelling of firm behaviour“, broadening the work by incorporating the points mentioned above. The original project investigated the effects of the demographic transition in Germany on business start-ups.
Discussion and Working Papers
Gottschalk, Sandra and Sebastian Theuer (2008), Die Auswirkungen des demografischen Wandels auf das Gründungsgeschehen in Deutschland, ZEW Discussion Paper No. 08-032, Mannheim. Download