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The Effect of Business Regulations on Nascent and Young Business Entrepreneurship

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  • van Stel, A.J.
  • Storey, D.
  • Thurik, A.R.

Abstract

We examine the relationship, across 39 countries, between regulation and entrepreneurship using a new two-equation model. We find the minimum capital requirement required to start a business lowers entrepreneurship rates across countries, as do labour market regulations. However the administrative considerations of starting a business – such as the time, the cost, or the number of procedures required – are unrelated to the formation rate of either nascent or young businesses. Given the explicit link made by Djankov et al. (2002) between the speed and ease with which businesses may be established in a country and its economic performance – and the enthusiasm with which this link has been grasped by European Union policy makers – our findings imply this link needs reconsidering.

Suggested Citation

  • van Stel, A.J. & Storey, D. & Thurik, A.R., 2006. "The Effect of Business Regulations on Nascent and Young Business Entrepreneurship," ERIM Report Series Research in Management ERS-2006-052-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:7996
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    1. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 1-37.
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    4. André Stel & Martin Carree & Roy Thurik, 2005. "The Effect of Entrepreneurial Activity on National Economic Growth," Small Business Economics, Springer, vol. 24(3), pages 311-321, February.
    5. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    6. Juan C. Botero & Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(4), pages 1339-1382.
    7. Roy Thurik & Sander Wennekers & Ingrid Verheul & David Audretsch, 2001. "An eclectic theory of entrepreneurship: policies, institutions and culture," Scales Research Reports H200012, EIM Business and Policy Research.
    8. André Stel & David Storey & A. Thurik, 2007. "The Effect of Business Regulations on Nascent and Young Business Entrepreneurship," Small Business Economics, Springer, vol. 28(2), pages 171-186, March.
    9. Enrico Santarelli (ed.), 2006. "Entrepreneurship, Growth, and Innovation," International Studies in Entrepreneurship, Springer, number 978-0-387-32314-5, November.
    10. David Blanchflower & A Oswald, 1993. "Entrepreneurship," CEP Discussion Papers dp0134, Centre for Economic Performance, LSE.
    11. Blanchflower, David G. & Oswald, Andrew & Stutzer, Alois, 2001. "Latent entrepreneurship across nations," European Economic Review, Elsevier, vol. 45(4-6), pages 680-691, May.
    12. Ingrid Verheul & André Van Stel & Roy Thurik, 2006. "Explaining female and male entrepreneurship at the country level," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 18(2), pages 151-183, March.
    13. Adriaan Van Stel & David Storey, 2004. "The Link between Firm Births and Job Creation: Is there a Upas Tree Effect?," Regional Studies, Taylor & Francis Journals, vol. 38(8), pages 893-909.
    14. Sander Wennekers & André Stel & Roy Thurik & Paul Reynolds, 2008. "Nascent entrepreneurship and the level of economic development," Small Business Economics, Springer, vol. 30(3), pages 325-325, March.
    15. Joan-Lluis Capelleras & Kevin F Mole & Francis J Greene & David J Storey, 2008. "Do more heavily regulated economies have poorer performing new ventures? Evidence from Britain and Spain," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(4), pages 688-704, June.
    16. Roy Thurik & Isabel Grilo, 2005. "Latent and actual entrepreneurship in Europe and the US: some recent developments," Papers on Entrepreneurship, Growth and Public Policy 2005-24, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    17. David B. Audretsch & Isabel Grilo & A. Roy Thurik, 2007. "Explaining Entrepreneurship and the Role of Policy: A Framework," Chapters, in: David B. Audretsch & Isabel Grilo & A. Roy Thurik (ed.), Handbook of Research on Entrepreneurship Policy, chapter 1, Edward Elgar Publishing.
    18. Anders Lundström & Lois A. Stevenson, 2005. "Entrepreneurship Policy: Theory and Practice," International Studies in Entrepreneurship, Springer, number 978-0-387-24202-6, November.
    19. Isabel Grilo & A. Roy Thurik, 2006. "Entrepreneurship in the Old and New Europe," International Studies in Entrepreneurship, in: Enrico Santarelli (ed.), Entrepreneurship, Growth, and Innovation, chapter 0, pages 75-103, Springer.
    20. Rolf Sternberg & Sander Wennekers, 2005. "Determinants and Effects of New Business Creation Using Global Entrepreneurship Monitor Data," Small Business Economics, Springer, vol. 24(3), pages 193-203, January.
    21. Andre van Stel & David Storey & Roy Thurik, 2006. "The effect of business regulations on nascent and actual entrepreneurship," Papers on Entrepreneurship, Growth and Public Policy 2006-04, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
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    More about this item

    Keywords

    Business Regulations; Global Entrepreneurship Monitor; Nascent Entrepreneurship; World Bank Doing Business; Young Businesses;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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