The direct employment effects of new businesses in Germany revisited: an empirical investigation for 1976–2004

Abstract

Based on an improved and extended database, the Establishment History Panel, we extend the analysis of Fritsch and Weyh [Small Business Economics 27(2), 245–260 (2006)] by investigating the development of employment in German start-up cohorts for the period 1976 to 2004. We confirm the typical pattern found in start-up cohorts: an initial increasing number of employees that is soon followed by a decreasing number. We also provide some of the first evidence for the “liability of aging” phenomena in Germany. Older firms face a relatively high risk of exit. We find that most entries with relatively large initial employment grow substantially in the first two decades. However, these businesses suffer from a considerable employment decline after 25 years.