NEW-FIRM STARTUPS, TECHNOLOGY, AND MACROECONOMIC FLUCTUATIONS

New-firm startup activity is examined within a framework pooling a cro ss-section of 117 industries over six time periods between 1976 and 19 86. A model is introduced relating startup activity both to elements o f the business cycle, in particular the macroeconomic growth rate, the cost of capital, and the unemployment rate, and to industry-specific characteristics, especially the technological conditions underlying th e industry. The pooled cross-section regression results suggest that m acroeconomic fluctuations as well as industry-specific elements contri bute to startup activity. While new-firm startups respond positively t o macroeconomic growth, they are promoted by a low cost of capital and high unemployment rate. A somewhat surprising result is that new-firm startups are not apparently deterred in capital intensive industries and where R&D expenditures play an important role. The empirical resul ts suggest that new firms may be able to overcome their inherent size and experience disadvantages in such markets through exploiting univer sity research and pursuing innovative activity.