The regional employment effects of new social firm entry

Habib Kachlami,Martin Obschonka,Per Davidsson,Darush Yazdanfar,Anders Lundström

doi:10.1007/s11187-020-00345-9

Habib Kachlami, Martin Obschonka + Show 3 more

Open Access

https://doi.org/10.1007/s11187-020-00345-9

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Abstract

As a contribution to research and theorizing on the economic role of new firm formation, we undertake the first ever investigation of regional employment effects of the entry of new social firms. Our study is guided by an established model of the employment effects of new firm entry over time and provides a direct comparison to the employment effects of commercial entrants. Our results show that the net employment effect of new social firms follows a wave pattern over the study’s eight-year horizon, apparently produced by the same combination of direct and indirect effects previously theorized for new commercial entrants. The results also indicate that net employment effect per social firm entrant is larger than for commercial firms. The study provides a first empirical assessment of employment creation effects of new social firms and contributes to a more nuanced theoretical understanding of employment effects across types of entrants. By specifying the economic contribution of social firms our study can open up a new track in social entrepreneurship research and provide important input to employment policy.

Highlights

Who creates jobs? There is broad consensus that young and small firms make important contributions to job creation and growth (e.g., Haltiwanger et al 2013)
The research question we address is “How do new social firm entrants contribute to regional employment creation over time, and how does their contribution compare to that of new commercial firms?”
The main focus, has been on the employment effects of commercial firms, with special attention to dynamics over longer periods of time. It was so far unclear whether new social firms make a significant contribution to regional employment creation, and how such effects develop over time

Summary

Introduction

There is broad consensus that young and small firms make important contributions to job creation and growth (e.g., Haltiwanger et al 2013). This has spurred a massive research interest in startups (new firm entry) and their economic effects, to better quantify the nature and conditions of the economic effects and to inform industrial policies more effectively, for example what type of new firms should be promoted (Audretsch et al 2007; Birch 1981, 1987; Kirchhoff 1994).

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