Entrepreneurship, regional development and job creation: the case of Portugal

Abstract

This paper investigates whether a high level of new business formation in a region stimulates employment growth in that region. We look at the lag structure of these effects using a data set covering a fairly large time span (1982-2002). We find that indirect effects of new firm births on subsequent employment growth are stronger than direct effects. However, indirect effects only occur about eight years after new firm formation. In particular, and unlike the findings from studies of other countries using a similar approach, positive indirect effects do not seem to tail off in the Portuguese case. This is likely due to a general pattern of results in which lags appear to be longer for Portugal. In view of these results, we suggest that the lag times and magnitudes the effects on new firm formation on subsequent employment growth are likely dependent on the types and qualities of start-ups.