Ready, set, go! Why are some regions entrepreneurial jump starters?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Ready, set, go! Why are some regions entrepreneurial jumpstarters? Terms of use: Documents in Michael Wyrwich AbstractPrevious research on market economies characterized by stable framework conditions shows that several regional factors determine start-up activity. Not much is known about what drives entrepreneurship in unstable environments characterized by significant institutional changes that affect the availability of entrepreneurial opportunities. To fill this gap, this paper focuses on postcommunist regions in which start-up activity was basically nonexistent under socialism but significantly more in evidence after the institutional shock of introducing a market economy. It is argued and shown that the allocation of talent into productive entrepreneurship is higher in areas abundantly endowed with individuals who have a relatively high ability to detect viable entrepreneurial opportunities, as indicated by their qualification, and in regions home to a population that is characterized by a high alertness toward opportunities, as indicated by remnants of an entrepreneurial culture that predates socialism. How institutional context affects entrepreneurship over the course of transition is reflected by the negative relationship between urbanization and entrepreneurship that presumably has to do with ill-devised socialist urban planning policies. The regional application of the theory on institutions and entrepreneurship outlined in this paper shows that an entrepreneurial rebound after an adverse large-scale shock accompanied by massive structural change and economic dislocation is most pronounced in areas with a strong human capital basis and a regional culture that favors entrepreneurship.JEL-Classifications: L26; R1; P25

One transition story does not fit them all: initial regional conditions and new business formation after communism

“…The second contribution is that the period we analyse covers almost 30 years (from transition until 2018), allowing us to examine long-term effects on start-up activity. Previous studies that consider regional differences in start-up activity in transition contexts focus on considerably shorter periods (Berkowitz & DeJong, 2005;Wyrwich, 2014). The third contribution, also in contrast to previous studies, is that we disaggregate a variety of different types of start-ups.…”

“…Our contribution is threefold: First, because East Germany adopted the entire institutional and political framework of West Germany virtually overnight (Brezinski & Fritsch, 1995), we are able to more accurately observe and measure the initial regional conditions. The disruptive exogenous shock found in the East German context rules out influences of endogenously evolving institutional settings on start-up activity (for a detailed argument, see Wyrwich, 2014). This is in sharp contrast to the slower and more endogenously evolving transition processes in other formerly communist countries of Eastern European (see, for example, Åslund & Djankov, 2014;Kollmorgen, 2019).…”

“…While communist era policy promoted large stateowned economic units and suppressed private sector enterprises (to the extent of declaring them illegal), the abrupt switch to a market economy generated abundant opportunities for new business creation, leading to a surge in entrepreneurship. The level of new business formation and its contribution to economic recovery, however, is marked by dramatic regional variations (Berkowitz & DeJong, 2005;Szerb et al, 2017;Wyrwich, 2014).…”

“…This variation in initial conditions is also associated with variations in economic growth at later stages of the transition process. Wyrwich (2014), andFritsch et al (2014), show that differences in start-up activity in East Germany's early transition years were also shaped by initial regional conditions, such as the remaining level of selfemployment at the time the Iron Curtain was dismantled.…”

“…In our analysis of the effect of initial conditions evident at the end of the communist period, we focus on four main regional determinants, namely: knowledge, entrepreneurial culture (remaining level of selfemployment), agglomeration economies (population density), and industry structure (Stam, 2010). At a regional level, most other potential determinants are strongly correlated with these factors, or reflect a specific aspect of one or more of these four categories of determinants (Wyrwich, 2014; see also Section 4.1, for further details).…”