The Decision to Start a New Firm: Personal and Regional Determinants. Empirical Evidence from the Regional Entrepreneurship Monitor (REM) Germany

The focus of our paper is on the link of two stylized facts — the impact of the region and the impact of socio-demographic determinants like sex and age on an individual’s decision to start a new firm. Doing so we intend to combine two hitherto rarely connected perspectives of entrepreneurship research: the classical and still dominant supply-side perspective which focuses on the individual traits of entrepreneurs (incl. skills, capabilities, sex, age, educational attainment and others) and the demand-side perspective which emphasizes the context (spatial, social, economical) in which entrepreneurship occurs (see Thornton, 1999 for an integration of both schools, see also Johannisson, 2000 and Bolton and Westlund, 2000 on this). We contribute to the literature by empirically investigating two issues: • Does the region matter for the decision to start a new business in Germany ceteris paribus, i.e. after controlling for sex, age, education etc.? • If region matters, what is inside the black box of the regional effect? How does the regional ‘entrepreneurial milieu’ affect the decision to start a new business? Our econometric study is based on data for 10,000 persons from a recent representative survey of the population in ten German planning regions as part of the REM project (see section 3). We use a version of the probit model that takes care of the regional stratification of the data, and the results of the non-linear models are carefully interpreted and illustrated.