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The effect of business regulations on nascent and actual entrepreneurship

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  • Andre van Stel
  • David Storey
  • Roy Thurik

Abstract

This paper investigates the effect of business regulations on various measures of entrepreneurship. Using data for a sample of countries participating in the Global Entrepreneurship Monitor between 2002 and 2005, we estimate a two-equation model explaining the nascent and the actual entrepreneurship rate, while taking into account the interrelationship between the two variables. Various determinants of entrepreneurship reflecting the demand and supply side of entrepreneurship as well as business regulation measures are incorporated in the model. Data on various categories of business regulations are taken from the World Bank Doing Business data base. Our estimation results suggest that, while entry regulations only have a small and indirect impact on the actual entrepreneurship rate, the impact of labour market regulations is more important. We also find that the determinants of opportunity and necessity entrepreneur-ship are fundamentally different.

Suggested Citation

  • 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.
    • Handle: RePEc:esi:egpdis:2006-04
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    References listed on IDEAS

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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.
    2. 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.
    3. Isabel Grilo & Roy Thurik, 2008. "Determinants of entrepreneurial engagement levels in Europe and the US," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 17(6), pages 1113-1145, December.
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    6. Ingrid Verheul & Sander Wennekers & David Audretsch & Roy Thurik, 2001. "An Eclectic Theory of Entrepreneurship: Policies, Institutions and Culture," Tinbergen Institute Discussion Papers 01-030/3, Tinbergen Institute.
    7. 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.
    8. 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.
    9. 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.
    10. Marco Gelderen & Roy Thurik & Niels Bosma, 2006. "Success and Risk Factors in the Pre-Startup Phase," Small Business Economics, Springer, vol. 26(4), pages 319-335, May.
    11. John Armour & Douglas Cumming, 2008. "Bankruptcy Law and Entrepreneurship," American Law and Economics Review, American Law and Economics Association, vol. 10(2), pages 303-350.
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    13. Davidsson, Per & Honig, Benson, 2003. "The role of social and human capital among nascent entrepreneurs," Journal of Business Venturing, Elsevier, vol. 18(3), pages 301-331, May.
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    15. 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.
    16. Isabel Grilo & Jesus-Maria Irigoyen, 2006. "Entrepreneurship in the EU: To Wish and not to be," Small Business Economics, Springer, vol. 26(4), pages 305-318, May.
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    20. Roy Thurik & Sander Wennekers & Lorraine Uhlaner, 2002. "Entrepreneurship and economic performance: a macro perspective," Scales Research Reports N200220, EIM Business and Policy Research.
    21. 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.
    22. Frederic Delmar & Per Davidsson, 2000. "Where do they come from? Prevalence and characteristics of nascent entrepreneurs," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 12(1), pages 1-23, January.
    23. Parker,Simon C., 2006. "The Economics of Self-Employment and Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521030632, September.
    24. David Audretsch & Roy Thurik, 2004. "A Model of the Entrepreneurial Economy," Papers on Entrepreneurship, Growth and Public Policy 2004-12, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
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    Cited by:

    1. Jacques Pelkmans & Andrea Renda, "undated". "Does EU Regulation Hinder or Stimulate Innovation?," IRMO Occasional Papers 5, Institute for Development and International Relations, Zagreb.
    2. 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.
    3. Mohammed R. Yaseen Zeebaree & Rusinah Bt. Siron, 2017. "The Impact of Entrepreneurial Orientation on Competitive Advantage Moderated by Financing Support in SMEs," International Review of Management and Marketing, Econjournals, vol. 7(1), pages 43-52.
    4. Kristina Nyström, 2014. "Business regulation and red tape in the entrepreneurial economy," Chapters, in: Charlie Karlsson & Börje Johansson & Roger R. Stough (ed.), Agglomeration, Clusters and Entrepreneurship, chapter 13, pages 283-300, Edward Elgar Publishing.
    5. José A Belso Martínez, 2009. "Entrepreneurship Policies and New Business Performance and Growth: An Empirical Analysis Based on Manufacturing Industries," Environment and Planning C, , vol. 27(2), pages 195-215, April.
    6. Leitão, João & Ferreira, João, 2007. "Liberalization of European Telecommunications and Entrepreneurship: Why German and Portuguese Experiences are so Equal and so Different?," MPRA Paper 5728, University Library of Munich, Germany.
    7. Sangheon Lee & Deirdre McCann & Nina Torm, 2008. "The World Bank's “Employing Workers” index: Findings and critiques – A review of recent evidence," International Labour Review, International Labour Organization, vol. 147(4), pages 416-432, December.
    8. Raquel Ortega-Argilés, 2022. "The evolution of regional entrepreneurship policies: “no one size fits all”," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 69(3), pages 585-610, December.
    9. Craig M Parker & Janice Redmond & Mike Simpson, 2009. "A Review of Interventions to Encourage SMEs to Make Environmental Improvements," Environment and Planning C, , vol. 27(2), pages 279-301, April.
    10. Werner Hölzl & Peter Huber & Serguei Kaniovski & Michael Peneder, 2006. "Teilstudie 20: Neugründung und Entwicklung von Unternehmen," WIFO Studies, WIFO, number 27459, March.
    11. Karen A. Murdock, 2012. "Entrepreneurship policy: Trade-offs and impact in the EU," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 24(9-10), pages 879-893, December.
    12. Pelkmans, Jacques & Renda, Andrea, 2014. "Does EU regulation hinder or stimulate innovation?," CEPS Papers 9822, Centre for European Policy Studies.

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    More about this item

    Keywords

    nascent entrepreneurship; young businesses; business regulations; Global Entrepreneurship Monitor; World Bank Doing Business;
    All these keywords.

    JEL classification:

    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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