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Edited by David B. Audretsch, Oliver Falck, Stephan Heblich and Adam Lederer
Chapter 23: Start-ups in Innovative Industries: Causes and Effects
Michael Fritsch THE ROLE OF INNOVATIVE START-UPS Policy-makers seem to be convinced that new businesses generate economic growth. For a long time, however, empirical analyses of the effect of new business formation on development have been rather rare (see Carree and Thurik, 2010, and Fritsch, 2008, for an overview). Recent research strongly suggests that not all new businesses have the same importance for growth. There is considerable indication that particularly wellprepared, innovative start-ups may stimulate economic development while the effect of non-innovative new businesses that replicate already existing products and processes is rather small or may even be negative.1 This rather plausible result suggests that innovative start-ups are of great importance for economic development. This contribution investigates the role and the effects of innovative start-ups for growth. In the next section, I introduce an important distinction between different types of effects that new businesses have on economic development and that the innovativeness of an entry plays an important role for these effects. The third section discusses different ways to identify innovative start-ups and provides empirical evidence showing that highly innovative new businesses are a rather rare event. I then investigate the typical backgrounds of founders and specific characteristics of innovative new businesses, subsequently reviewing their effects on employment and growth in the fifth section. The sixth section discusses what policy could do to stimulate a larger number of promising innovative start-ups. The final section summarizes the results and identifies some important questions for further research. HOW CAN (INNOVATIVE) START-UPS AFFECT...
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