Regulatory Burden, Rule of Law, and Entry of Strategic Entrepreneurs: An International Panel Study
University of Strathclyde - Strathclyde Business School
Imperial College Business School; Aalto University, Department of Industrial Engineering and Management
August 16, 2010
Journal of Management Studies, Forthcoming
Entry into entrepreneurship is a strategic act for individuals who seek an optimal way to exploit their human, social and financial capital. Trade-offs associated with this choice are influenced by institutional conditions. We use signaling theory, employment choice theory and theory on strategic entry to develop hypotheses on the effect of business regulations and rule of law on strategic and non-strategic entrepreneurial entry. Analysing a six-year panel of 54 countries, we find lighter burden of regulation associated with a higher rate and relative prevalence of strategic entrepreneurial entry. Rule of law moderates this effect such that regulation has a significant effect on strategic entry only when rule of law is strong. These findings are robust against alternative proxies. Implications are drawn for prospective entrepreneurs, existing organisations, policy, and further research.
Number of Pages in PDF File: 55
Keywords: Entrepreneurship, regulation, rule of law, signalling, employment choice, strategy
Date posted: October 25, 2010
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