Enterprise creation and economic recovery: the case of Rio Grande do Sul

Abstract

This article analyses the dynamic of new enterprise creation in Rio Grande do Sul, measured by the business start-up rate in relation to the number of pre-existing firms and also relative to the labour force. The analysis shows that business start-up rates are not homogeneous regionally or across sectors. It also identifies a relation between regional economic growth and the business start-up rate, which depends on the rate of renewal of the enterprise base and fundamentally on the entrepreneurial drive of local workers, which affects the degree to which enterprise creation rates converge between regions. The results also show that an increase in the business start-up rate improves regional economic performance after a period of time.