published in: Jahrbuch für Regionalwissenschaft / Review of Regional Reseach, 2005, 25 (1), 91-105
This paper contributes to empirical research in entrepreneurship by focusing on the link
between two stylized facts that emerged from a number of studies for Germany and other
countries: Entry rates differ between regions, and the propensity to become an entrepreneur
is influenced by socio-demographic variables and attitudes. We develop a theoretical
framework to discuss this link, and we test whether for a person of a given age, degree of
schooling, attitude towards risk etc. regional variables do matter for the decision to start a
new business ceteris paribus. Our econometric study is based on data for 10.000 persons
from a recent representative survey of the population in ten German planning regions, the
Regional Entrepreneurship Monitor (REM). We use a version of the probit model that takes
care of the regional stratification of the data, and the results of the nonlinear models are
carefully interpreted and illustrated. We find that the propensity to step into self-employment
is, among others, higher for males, unemployed, people with contacts to a role model, and
with past entrepreneurial experience, who live in more densely populated and faster growing
regions with higher rates of new firm formation, while risk aversion and high prices of land
have the opposite impact.
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