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Workshop on Improving Statistics on SME's and Entrepreneurship, Paris, 17-19 September 2003 Differences in entry and exit in European countries – findings and impact of methodological differences NICOLA BRANDT Economic Analysis and Statistics Division
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Workshop on Improving Statistics on SME's and Entrepreneurship, Paris, 17-19 September 2003 Differences in entry and exit in European countries – findings and impact of methodological differences NICOLA BRANDT Economic Analysis and Statistics Division Organisation for Economic Co-operation and Development
This presentation • Describes the findings from some recent OECD work on firm entry and exit, survival and growth using new cross-country data from Eurostat. • Discusses some of the methodological difficulties associated with international business demographics data. • Draws conclusions and provides an outlook on OECD work linking firm dynamics to economic performance
Results of entry rate regressions Indicates significance at the ***1 %, ** 5 %, * 10 % level Denmark is the reference
The cross-country variation in entry rates is mainly due to ICT-related industries Country-specific ICT-industries effects
…which are particularly dynamic Fixed effects for selected industries Indicates significance at the ***1 %, ** 5 %, * 10 % level Manufacture of food & beverages is the reference
Entry and exit are highly correlated across industries Cross-industry correlation of entry and exit
New firms are small - but results differ between Eurostat and OECD data... Average size of entering firms
...because firms without employees play an important role in both entry and exit Entry and exit: proportion of firms with less than five employees
…few large firms enter and exit the market Entry: proportion of firms with more than 20 employees
… especiallywhen entry and exit are cleaned from other demographic events Exit: proportion of firms with more than 20 employees
Results of hazard rate regressions • Indicates significance at the ***1 %, ** 5 %, * 10 % level • Denmark is the reference country • 1-4 employees is the reference size class
Few new firms survive, but those that do often grow very fast Two-year employment gains among surviving entrants
Conclusions • Thresholds and the ability to identify genuine firm entry and exit can affect results. • Hazard rates differ considerably across countries, while differences in entry rates are sizeable only among ICT-related industries. • This indicates that policy may be important mainly for firm survival and for entry in young and dynamic sectors. • To judge whether high firm entry, growth or survival are desirable, the link with economic performance has to be studied. There is ongoing OECD work on this.