Heterogeneity in New Venture Formation Rates Across Nations: The Schumpeterian and Institutional Economics Views

Chapter 1 in: World Scientific Reference on Entrepreneurship, Forthcoming

36 Pages Posted: 17 Apr 2017

See all articles by Yong Li

Yong Li

University of Nevada Las Vegas

Shaker A. Zahra

University of Minnesota - Twin Cities - Carlson School of Management

Sai Lan

Peking University

Date Written: April 12, 2017

Abstract

Interest in promoting entrepreneurship has become a worldwide phenomenon. Yet, empirical evidence suggests that countries vary significantly in their ability to incubate and create new firms. Sources of these differences across countries are not well understood. In this paper, we examine the cross-country heterogeneity of new venture formation rates by testing two core propositions derived from the Schumpeterian and institutional economic views of entrepreneurship. The Schumpeterian view posits that nations that offer greater technological opportunities for entrepreneurs to exploit are likely to have higher rates of new venture formation. Following the institutional economics perspective, nations with facilitating formal institutions can provide a better incentive structure for entrepreneurs to create new businesses. Our empirical analysis of new venture formation rates for 84 nations during 1996-2005 shows that technological opportunities and formal institutional development contribute substantially to the heterogeneity of new venture formation rates across nations, supporting both theoretical perspectives.

Keywords: technological opportunities, Schumpeter innovation, formal institutions, new venture formation rates, cross-country comparative research

Suggested Citation

Li, Yong and Zahra, Shaker A. and Lan, Sai, Heterogeneity in New Venture Formation Rates Across Nations: The Schumpeterian and Institutional Economics Views (April 12, 2017). Chapter 1 in: World Scientific Reference on Entrepreneurship, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2951952

Yong Li (Contact Author)

University of Nevada Las Vegas ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

Shaker A. Zahra

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Sai Lan

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

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