This article examines the determinants of employment creation in small regional firms. Anumber of factors are considered that account for the external and internal environment of the firm. A simple theoretical model of employment creation is developed where the determinants of a firm’s employment are the volume of production, the capital of the firm, and the uncertainty of the demand as evaluated by the individual entrepreneur. Employment is found to be positively related to sales, the amount of required paperwork, the application of new production processes, and the openness of the establishment to new ideas. There is no significant qualitative difference in results when a distinction is made between male and female workers. However, in terms of the magnitude of results, female employment is more difficult to account for (lower coefficient of determination), and firms employing females are more likely to be innovative.
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