New firm formation and employment growth: Regional and business dynamics

Abstract

This study examines differences in the effects of start-up rates on subsequent employment change. Two sources of such differences—types of start-ups and types of regions—are analyzed. We find that differences between knowledge-based and other start-ups dominate differences between highly agglomerated and modestly agglomerated regions. In particular, differences in the effects of new start-ups on subsequent employment growth between highly agglomerated and modestly agglomerated regions are greater for knowledge-based start-ups than for other types of start-ups. The results suggest that, while knowledge-based start-ups are likely to impart greater benefits on future employment than other types of start-ups, these benefits are greater when those start-ups locate in more agglomerated regions.