|| In the latter half in 1990's, the extensive public policies for promoting newly establishment of the enterprise (for example, "Law for facilitating the creation of New Business" enforced in 1999) were introduced in Japan. In this paper, I would like to search the theoretical background of such policy as the policy for promoting evolution of industry that the innovative activities were accompanied by newly establishment and discontinuance ofbusiness of the enterprise. To begin with, I carried out the fact finding on the relation between newly establishment and discontinuance of business using the data of "The 1999 Establishment and Enterprise Census." And I verified some hypotheses on the evolution of industries which Acs and Audretsch (1991) and Audretsch (1995) presented and tried the reexamination of these
hypotheses. I set the increasing rate of newly establishment (the number of employee base) and the increasing rate of discontinuance of business (the number of employee base) during 1996-1999 period as main variables. I carried out the regression analysis on manufacturing industries and service industries (industrial classification of 2 and 3 digits), and confirmed that there was the positive correlation between the increasing
rate of newly establishment and the increasing rate of discontinuance of business. I examined the ratio of increasing rate of discontinuance of business and increasing rate of newly establishment (D / E ratio) on enterprise scale (by the number of employee base) and industrial sector (industrial classification of 2 digits). As the result, I confirmed that the D / E ratio described the V-shaped curve with the extension of enterprise scale in many industrial sectors. I consider that the base point of this V-shaped curve shows minimum efficient scale. I confirmed that there was the positive correlation between this minimum efficient scale (D / E ratio at
V-shaped base point) and employment increasing rate of the industrial sector. Based on these results of analysis, I describe some policy implications on the public policies for the newly establishment of enterprises and the initial support and growth support for the newly-established and smallscale enterprises.