KfW/ZEW Start-up Panel 2010 - There's Light on the Horizon

Young firms in Germany have coped considerably well with the economic crisis. Their turnover and profit situation proved stable and, according to the firms, will improve next year. "Young firms consider themselves well positioned after the economic and financial crisis. The positive profit expectations for 2010 confirm this. The firms have actively faced the crisis and have concentrated on their strengths by adjusting their products to their clients’ demands. At the same time, young firms have invested less then they had planned due to financing problems," says Dr. Axel Nawrath, member of Managing Board of KfW Bankengruppe, today at the press conference on the "KfW/ZEW Start-up Panel 2010" in Frankfurt. The third KfW/ZEW Start-up Panel, a cooperation of KfW Bankengruppe, the Centre for European Economic Research (ZEW) Mannheim and credit rating agency Creditreform, analyses the development of economically active start-ups since their foundation.

In 2009, economically active start-ups have created around 560,000 jobs. This is the peak in the overall observation period from 2006 to 2009 (2008: 387,000, 2007: 474,000, 2006: 455,000). The increased employment effect arises from an increased number of start-ups and, in particular, an average larger start-up size. In 2009, the latter was 3.0 full jobs including founder, thus considerably exceeding the values of the previous years (2008: 2.2, 2007: 2.5, 2006: 2.3). "The increasing instability on the labour markets has caused many employees to consider start-ups as attractive employer. Moreover, stimulus packages by the German government gave impetus from which young firms have particularly benefited," says Dr. Georg Licht, head of ZEW research department Industrial Economics and International Management.

Young firms have also strengthened their innovativeness: In comparison to the previous year, the percentage of firms offering market innovations increased by 2 percent points to 13 percent. This development also indicates stronger R&D activities: About 15 percent of young firms conducted R&D in 2009 (2008: 13 percent). "The innovative activity plays a major role for young firms for creating competition advantages. Therefore it is important that young firms consider innovations an essential instrument to come well through the crisis," says Michael Bretz, head of economic research at Creditreform.

However, the positive results are darkened when looking at the firms’ innovations. In comparison to the previous years (2009:63 percent, 2008: 75 percent), considerably less young firms made investments, and the average investment volume also decreased. Investments were affected by the lack of financial means. In total, the financing difficulties of young firms have increased in 2009 (2009: 19 percent of firms, 2008: 16 percent). In particular firms conducting R&D or introducing market innovations frequently face difficulties. "In the next few years, young firms have to fill in the existing investment gaps and strengthen their innovations," says Dr. Norbert Irsch, Chief Economist of KfW Bankengruppe. He continues: "Only then, they will be able to tap their full potential for development."

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.

For further information please contact

Dr. Georg Licht, Phone: +49 (0)621/1235-177, E-mail: licht@zew.de