Broadband Infrastructure and Entrepreneurship: Evidence from German Municipalities

Abstract

Policy makers in many places regularly call for broadband infrastructure deployment to foster regional development. While some empirical studies deal with the productivity impact of broadband Internet availability, few hard facts are known about its relation to establishment start-up. This paper contributes to closing the gap, providing causal evidence on the impact of broadband Internet availability on establishment start-up. We apply an instrumental variables approach, exploiting technological peculiarities of the preexisting voice telephony network that impeded high-speed Internet availability to circumvent endogeneity bias. We find that Internet effects on establishment start-up might take some time to realize and are likely heterogeneous across sectors, establishment size and knowledge intensity.