Academic journal article Global Economic Observer

Do Specific Growth Drivers Exist for Firms? A Regional Analysis of Start-Ups and Industrial Growth

Academic journal article Global Economic Observer

Do Specific Growth Drivers Exist for Firms? A Regional Analysis of Start-Ups and Industrial Growth

Article excerpt

1 Background of Study

-Angel investors- and -Venture capitalist- are often what -entrepreneurs- venturing to -start new firms-need-, in their quest for -start-up funds-. -Validated business models- are also not likely to break new grounds as much as those that are un-validated with un-validated business model having higher innovation probability and unique success. There is also the question of floating highly scalable business models with high throughput for success. A scalable business model is one in which revenue will exceed cost of operation in no distant time from start-up. Business registration and economic growth are also likely to be connected. Till date little studies have tried to link the effect of start-ups and industrial growth in a quantitative manner as done in this study. Some channels through which start-ups can affect industrial growth include through new product introduction, payment of taxes by registered new firms thereby increasing the revenue base of the economy (through new revenue) as well as the job creation process. The attempt adopted in this study, is to explore if regional specific differences are responsible for the extent to which start-ups affect growth or if they do not count in the relationship between new business registrations the measure of start-up in this study and economic growth. In conducting this study panel data is utilized which allows for the control of unobservable effects as well omitted variable bias in the econometric panel regression carried out in the study. The study utilizes data from six regional divide of the World which include the European Union, Latin American, East Asia Pacific, the United States to represent North America, Middle East and North Africa and finally Sub- Saharan Africa. The estimation techniques used in the study are the quantile regression and the generalized method of moment estimation techniques. Their choice stems from the attractive superior arguments, of overcoming the issues of choosing a suitable functional form as well as providing heteroscedastic robust standard errors. The rest of the paper is divided into the empirical analysis and data sections, the results, the relationship between start-ups and enterprise growth and the concluding sections.

2 The Scope and Objectives of the Study

In this section the scope and objective of the study is stated. The study investigates the effect of startups on regional industrial growth (or aggregate enterprise growth proxied, using industrial GDP growth) in six regions mentioned earlier in the study. The extent to which new business registration affect economic growth is becoming a source of concern for many policy makers as well as investigators of new business registration and their effect on business growth particularly for the private sector, since new market entry increases competition across in markets. The specific objectives that the study attempts to answer include:

Are start-ups driving industrial growth (aggregate enterprise growth) across regions?

And secondly do regional specific differences influence the effect of start-ups on driving industrial growth (aggregate enterprise growth) across regions?

3 Empirical Analysis and Data

In this section the empirical arguments and the data utilized in the study is presented. The first intuitive question the study asks is if start-ups can drive industrial growth (specifically enterprise growth) across regions? Secondly does the measure of new business registration capture the amount of new start-ups across regions and if regional difference count in industrial growth? While many start-ups might not be scalable business ventures, it will be important to know if new business registration has any impetus for private sector growth. New business registration seems to be a suitable measure for start-ups in the absence of any other quantitative data, since it captures new start-ups and firms who wish to set up new divisions that have some level of autonomy in their larger organization. …

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