The Role of Regional Conditions for Newly Emerging KIBS Industries in the Face of Radical Institutional Change

This paper is devoted to analysing the effect of regional conditions on start-up activities in the knowledge-intensive business service (KIBS) industries. The region under analysis is the former German Democratic Republic (GDR), which experienced a "shock transition" of the institutional framework in the course of its reunification with the Federal Republic of Germany in 1990. KIBS industries did not exist in the former GDR. The results show that KIBS start-up activity emerged in densely populated areas and in regions with a large market size. The regional stock of knowledge has a significant positive effect on start-up activity as well. Altogether, the findings show that regional conditions matter even if the economic system that shaped these conditions followed completely different guiding principles from a market economy.