Udo Brixy, Martin Murmann

Charlie Karlsson

Recent research suggests that employment in young firms is more negatively impacted during economic downturns than employment in incumbent firms. This questions the effectiveness of policies that promote entrepreneurship to fight crises. We complement prior research that is mostly based on aggregate data by analyzing cyclical effects at the firm level. Using new linked employer-employee data on German start-ups we show that under constant human capital of the firms' founders, employment growth in less than 1.5 year-old start-ups reacts countercyclically and employment growth in older start-ups reacts procyclically. The young start-ups realize their countercyclical growth by hiring qualified labor market entrants who might be unable to find employment in incumbent firms during crises. This mechanism is highly important in economic and management terms and has not been revealed by prior research.

Charlie Karlsson, Mikaela Backman

Udo Brixy

In the entrepreneurship literature, it is generally assumed that an individual starts a firm where they have strong ties, normally in the residence municipality or where they worked. We scruti-nize this general assumption and show that firm location depends on individual charac¬teristics such as the commuting experience. Our results show that commuting influence the firm location choice. The probability of starting a firm in the work municipality increases if the entrepreneur is a commuter, holding constant the type of region and unobservable and observable individual features.