Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/323545 
Year of Publication: 
2024
Citation: 
[Journal:] Small Business Economics [ISSN:] 1573-0913 [Volume:] 64 [Issue:] 3 [Publisher:] Springer US [Place:] New York, NY [Year:] 2024 [Pages:] 1387-1413
Publisher: 
Springer US, New York, NY
Abstract: 
Whether firms founded during or outside economic crises have greater growth potential is an important question for both prospective entrepreneurs and policy makers. Existing research offers conflicting answers, and mostly either focuses on aggregate cohort-level effects or selectively excludes small new firms from the analyses. Using extensive linked employer-employee data on young German firms around and during the Global Financial Crisis, a period of sharply reduced access to external capital and recession, we show that young firms respond to cyclical conditions in highly heterogeneous ways. Our firm-level results reveal that the average new firm found it easier to hire its first employees when it was founded during the crisis. These firms achieved countercyclical growth by hiring career entrants. More specifically, hiring in very young (<1.5 years) and small to medium-sized (below the 90th percentile) young firms was countercyclical, while this was not the case for older and larger young firms. Thus, the firm-specific effects for young entrepreneurial firms may be very different from those reported in previous research. Our results suggest that market entry during a crisis may facilitate hiring and that policies that promote entrepreneurship may usefully complement policies that encourage labor hoarding by incumbents during recessions.
Subjects: 
Firm growth
Hiring
Entrepreneurship
Business cycle
Global Financial Crisis
JEL: 
D22
E32
J23
L11
L25
L26
M13
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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