Abstract:

Nowadays, entrepreneurship, free initiative and the dynamics of creating and developing small and medium enterprises (SMEs) are seen by most scholars and policy-makers as indisputable demonstrations of economic and social development, adaptability, innovation and prosperity. Researches have also shown a distinct relationship between local, regional and national development and new business formation, even if the moment of positive effects occurrence, the patterns and rhythms of growth and territorial diffusion, are still the subject of scientific research and political debate. The reasons behind the firms’ creation and discontinuation are based on numerous economic, legislative, environmental and societal factors. In our paper, by using data and information regarding Romania, we aim to provide a better understanding of the ways in which firm formation and/or business churn affect business performance at national and regional levels, in terms of Gross Domestic Product (GDP), active population and net investments in the economy. Our results do not fully confirm the relationship between the evolution of the number of newly created companies and the selected economic indicators, but neither the increase of the number of closed firms is associated with economic stagnation or economic crisis. We have questioned the way in which free initiative and the dynamics of small businesses are interpreted, referring to the exaggerated attention paid to the pace or the level of new firm’s formation or discontinuation, although many of these figures are the result of various activities and causes, that have little to do with the genuine entrepreneurial spirit and the reality of managing a firm in present days.