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
Date Written: April 12, 2017
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
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