Entrepreneurial Entry: Which Institutions Matter?

46 Pages Posted: 21 Apr 2009

See all articles by Ruta Aidis

Ruta Aidis

University College London; University of Amsterdam - Faculty of Economics and Business (FEB)

Saul Estrin

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Tomasz Mickiewicz

Aston University - Aston Business School

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Abstract

In this paper we explore the relationship between the individual decision to become an entrepreneur and the institutional context. We pinpoint the critical roles of property rights and the size of the state sector for entrepreneurial activity and test the relationships empirically by combining country-level institutional indicators for 44 countries with working age population survey data taken from the Global Enterprise Monitor. A methodological contribution is the use of factor analysis to reduce the statistical problems with the array of highly collinear institutional indicators. We find that the key institutional features that enhance entrepreneurial activity are indeed the rule of law and limits to the state sector. However, these results are sensitive to the level of development.

Keywords: entrepreneurship, property rights, access to finance

JEL Classification: L26, P14, P51, P37

Suggested Citation

Aidis, Ruta and Estrin, Saul and Mickiewicz, Tomasz Marek, Entrepreneurial Entry: Which Institutions Matter?. IZA Discussion Paper No. 4123. Available at SSRN: https://ssrn.com/abstract=1391795

Ruta Aidis (Contact Author)

University College London ( email )

Gower Street
London
United Kingdom

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+ 31 20 525 4011 (Phone)
+ 31 20 525 4254 (Fax)

Saul Estrin

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Tomasz Marek Mickiewicz

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

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