An Empirical Analysis of Economic and Socio-Demographic Determinants of Entrepreneurship Across German Regions

Entrepreneurship is fundamental for a country's economic development through its positive effect on innovation, productivity growth, and job creation. In entrepreneurial research, one of the most important problems is to define the factors that actually determine entrepreneurial action. This study analyzes that question in the case of Germany by taking an aggregated approach that focuses on socio-demographic and economic determinants of regional entrepreneurship. Based on a literature review of German and international regional-level research, six hypotheses are developed and empirically tested using the most recent available data on 385 German regions as units of analysis. The results are surprising. In the case of household income, unemployment, education and marital status the relationship is significant but contrary to earlier research. Only regional age structure seems to be a stable predictor of regional entrepreneurship. The results indicate that in recent years there was a major shift in the determinants and characteristics of entrepreneurship in Germany.