Dynamic analysis of business demography strategy: An European perspective

Abstract

The development of entrepreneurial spirit based on market opportunities, innovation, and creativity is what drives economic growth, provided this takes place under conditions of sustainability. To ensure such development, an institutional framework conducive to business creation must be estab-lished. However, the scope should be broadened to consider the lessons learned by entrepreneurs who have not failed in their first five years of activity. Authorities can thereby design and implement suitable measures to ensure high rates of entrepreneurial survival. This paper presents an analysis of business demography in the Eurozone, with a special focus on new firms. Using business demography data from Eurostat for the period 2008 to 2015, we study differences in business dynamics (business creation and failure), comparing the likelihood of survival and failure of newly created firms across different stages of the economic cycle. During the aforementioned period, entrepreneurs and self-employed persons intensified their internation-alization efforts and increased their contact with other regions in response to the effects of lower internal demand and variation in relative labor costs. In this paper, we analyze a) historical trends in the rate of entrepreneurship by business size, legal form, and sector; b) trends in business specialization across European regions; and c) the regional trends in the number of firms per 1,000 active persons (or business density) as an indicator of growth to assess the convergence or divergence of Northern European regions and Southern European regions over the study period. These analyses highlight the economies with the highest rates of entrepreneurial survival and have implications for employment and sector dynamics