Techno-Institutional Leap and the Formation of New Firms

36 Pages Posted: 2 Apr 2013 Last revised: 12 Jan 2014

See all articles by Martha Garcia-Murillo

Martha Garcia-Murillo

Syracuse University - School of Information Studies

Jorge Andrés Vélez

Universitat Autónoma de Barcelona

Patricia Adriana Vargas Leon

Syracuse University; Yale University - Yale Information Society Project

Date Written: March 31, 2013

Abstract

In this paper we focus on factors that affect new business entry as they have been shown to generate both employment and economic growth. Thus, the purpose of this paper is to identify the economic, political, social and technological factors those that have the greatest impact on the creation of new firms. We put forward the idea of a techno-institutional leap, meaning that information and communication technologies (ICTs), because of their multipurpose nature, have the ability to help potential entrepreneurs overcome weaknesses in other areas of country economies. The study uses a fixed effects statistical model, developed from ITU and World Bank data. The results support the hypothesis of the techno-institutional leap and show that income and governance elements related to business operations and ICTs affect new business entry. Other factors such as general governance, income inequality, access to credit, trade, and education were not significant.

The leap happens because of the virtuous cycle that they generate. Even though most developing nations are still behind in access, their populations are aware of the Internet and its capabilities. This means that the further expansion of networks will lead also to a quick adoption of the applications and services that are now available on the Internet. In this paper, we wish to determine if ICTs can help to overcome some of the negative impact that adverse political, economic, social and technological factors have on the development of new businesses.

The main contribution of this paper is, therefore, to determine if ICT's have a positive impact on business creation and have the capacity to help business owners overcome deficiencies caused by economic, political and social factors in the countries where they operate.

Keywords: New business, ICTs, governance, income, credit, education, trade, techno-institutional leap

JEL Classification: L80, L96, O14

Suggested Citation

Garcia-Murillo, Martha A. and Vélez, Jorge Andrés and Vargas Leon, Patricia Adriana, Techno-Institutional Leap and the Formation of New Firms (March 31, 2013). Available at SSRN: https://ssrn.com/abstract=2242810 or http://dx.doi.org/10.2139/ssrn.2242810

Martha A. Garcia-Murillo (Contact Author)

Syracuse University - School of Information Studies ( email )

220 Hinds Hall
Syracuse, NY 13244
United States
(315) 443-1829 (Phone)
(315) 443-5806 (Fax)

Jorge Andrés Vélez

Universitat Autónoma de Barcelona ( email )

Edificio B
Department Empresa
Barcelona, CO Catalunya 08193
Spain

Patricia Adriana Vargas Leon

Syracuse University ( email )

Hinds Hall
Syracuse, NY 13244
United States

Yale University - Yale Information Society Project ( email )

127 Wall Street
New Haven, CT 06511
United States

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