The Persistence of Regional New Business Formation-Activity over Time – Assessing the Potential of Policy Promotion Programs

We investigate regional differences in the level and the development of regional new business formation activity. There is pronounced variance of start-up rates across regions. The level of regional new firm formation activity is rather path-dependent so that changes are relatively small. The main factors determining the level of regional start-up activity are innovation and entrepreneurship. In addition unemployment seems to play a role. These factors also appear to be responsible for changes in the level of regional new business formation activity and could be an appropriate starting point for policy measures trying to promote start-ups. Our empirical evidence strongly suggests that such measures may have significant effect only in the long run.