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Workshop on Improving Statistics on SME's and Entrepreneurship, Paris, 17-19 September 2003

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

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  1. 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

  2. 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

  3. Results of entry rate regressions Indicates significance at the ***1 %, ** 5 %, * 10 % level Denmark is the reference

  4. The cross-country variation in entry rates is mainly due to ICT-related industries Country-specific ICT-industries effects

  5. …which are particularly dynamic Fixed effects for selected industries Indicates significance at the ***1 %, ** 5 %, * 10 % level Manufacture of food & beverages is the reference

  6. Entry and exit are highly correlated across industries Cross-industry correlation of entry and exit

  7. New firms are small - but results differ between Eurostat and OECD data... Average size of entering firms

  8. ...because firms without employees play an important role in both entry and exit Entry and exit: proportion of firms with less than five employees

  9. …few large firms enter and exit the market Entry: proportion of firms with more than 20 employees

  10. … especiallywhen entry and exit are cleaned from other demographic events Exit: proportion of firms with more than 20 employees

  11. 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

  12. Few new firms survive, but those that do often grow very fast Two-year employment gains among surviving entrants

  13. 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.

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