Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: We use longitudinal data over a decade on start-ups and employment in Swedish regions and analyze the effect of start-ups on subsequent employment growth. We extend previous analyses by examining the influence of regional start-ups in a sector on regional employment growth in the same sector and on other sectors. We find differences between different types of start-ups. Knowledge-intensive start-ups seem to have larger effects on the regional economy. In particular, start-ups in high-end services have significant negative impacts on employment in other sectors but a positive long-run impact. This is consistent with the idea that start-ups are a vehicle for changes in the composition of regional industry. Moreover, our results illustrate that the known S-shaped pattern can be attributed to different effects that start-ups in a sector have on employment change in the same sector and in others.

Keywords: Entrepreneurship; Employment Growth; Regional; Development; Start-ups

JEL-codes: J23; M13; O52

34 pages, December 3, 2008

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