ABSTRACT
This chapter addresses the debate about whether start-ups increase regional productivity growth through such effects as the fostering of competition. It argues that entry and exit activities have positive effects on total factor productivity (TFP) growth for service sectors. Population density plays an important role for TFP growth in manufacturing; the regional productivity grows more rapidly in more densely populated areas and - as the dummy shows - productivity is growing faster in the East, which indicates that eastern Germany is catching up with western Germany. Start-ups do have an impact on TFP growth. In particular the mostly lacking significance for the service sector indicates a need for more research in this area. The contribution of the start-up rate is significant in the service sector for both East and West, in manufacturing only for the West. In the service sector, high rates of newly founded firms in combination with high rates of new firm survival are decisive for employment growth.
