Entrepreneurship Capital and Economic Performance

Entrepreneurship capital is defined as "a region's endowment with factors conducive to the creation of new businesses" and it exerts a positive impact on the region's economic output. The production function model is developed to test this positive impact and the model is estimated for various regions in Germany. Data were acquired from a startup panel developed by the Centre for European Economic Research in Mannheim, Germany, and is based on data provided biannually from the largest German credit rating agency, Creditreform. Evidence suggests that various measures of entrepreneurship capital contribute to output. Regions with a higher level of entrepreneurship capital show higher levels of output and productivity, while those lacking entrepreneurship capital have a tendency to generate lower levels of output and productivity. The impact of entrepreneurship capital is stronger than that of knowledge capital.Evidence indicates that entrepreneurial capital plays a very important role in the production function model presented.(JSD)