The project aims to shed light on the impact of market entry on the economy’s growth and innovation capacity as well as aggregate productivity development.
The impact of market entry on aggregate productivity is of high interest for economic policy. However, the assessment of this contribution is not straight forward, since market entry affects aggregate productivity through various channels. On the one hand, market entrants have a direct effect on aggregate productivity by introducing their own products and services. Although market entrants initially contribute little to the total economic output, they have lower barriers to capital access and bring new ideas to the market more quickly. On the other hand, start-ups influence the incumbent productivity development of established firms by generating competitive pressure and providing incentives for innovation in existing firms. This aspect creates a direct link between the proposed project and the findings of the previous Bertelsmann project, which examined the influence of the competitive environment on productivity development.