KfW/ZEW Start-up Panel 2010: Private Economy Important For Innovative Company Foundations

Many business ideas of newly founded companies were developed while the founders were employed at private companies. New start-ups based on such ideas are considerably more innovative than other start-ups. Moreover, they produce a considerably higher percentage of market innovations. This is one of the main findings of the latest KfW/ZEW Start-up Panel, which is conducted by KfW Bankengruppe in cooperation with the Centre for European Economic Research (ZEW), Mannheim, and the credit rating agency Creditreform.

Ideas derived from the founder’s previous employment play a essential role for the start-up landscape. Between 2006 and 2008 in Germany, an average of 14,500 start-ups was founded annually. For these foundations, new ideas developed within the founder’s employment in a private company were vital. Idea-based spin-offs from private companies make up about seven percent of all active foundations. Founders not only benefit from ideas but also from special skills they have developed while working for their previous employer. For 21 percent of all new start-ups, these skills were vital for the foundation. These start-ups are called competence-based spin-offs from private companies.

The KfW/ZEW Start-up Panel indicates that idea-based spin-offs produce a considerably higher percentage of market innovations than other start-ups. In the first four years after the foundation, 40 percent of idea-based spin-offs have introduced at least one innovation to the market, whereas only 28 percent of other start-ups have done so. Competence-based spin-offs on the other hand are not more innovative than other start-ups. This suggests that not the skills but the ideas the founder has developed in previous employment lead to the foundation of innovative companies.

Business ideas for start-ups emerge particularly often while the founders are working in a company’s research department. Founders who used to work as manager or chief executive also develop business ideas for start-ups more often. Around 50 percent of founders of idea-based spin-offs have first tried to implement the idea in the parent company. A reason why this has obviously not worked could be that, from the parent company’s perspective, the new idea did not fit into the product range. It could also be possible that the parent company thought the idea was too risky or not promising, and thus refrained from implementing the idea.

Twenty-nine percent of all idea-based spin-offs were either supported or initiated by the parent company, whereas most parent companies were neutral towards the start-up activities of their former employees. Only eight percent of parents companies interfered with the foundation of idea-based spin-offs. In particular, this was the case when the parent company feared losing competitiveness if the business idea or technology developed by the former employee proved to be superior to their own.

KfW/ZEW Start-up Panel (KfW/ZEW-Gründungspanel)

The KfW/ZEW Start-up Panel originates from a cooperation of the Centre for European Economic Research (ZEW), the KfW Bankengruppe (KfW banking group) and the credit rating agency Creditreform. It studies the development of start-ups for several years and provides a wide range of firm-specific information. The annual sample of about 6,000 firms is based on start-ups active in the economy, i.e. new firms which are either in the commercial register, have had recourse to outside capital, credits or similar funds, or were included in the economic process in any other way. The start-ups collected tend to be larger than start-ups as side jobs or for freelancers, which are also listed in the total number of start-ups.

The "KfW/ZEW Start-up Panel 2010" is available online

For further information please contact

Dr. Michaela Niefert, Phone: +49 (0)621/1235-171, E-mail: niefert@zew.de