Entrepreneurial Quality and Startup Growth in India

Abstract

This study estimates and maps the quality of entrepreneurship in India, using government census data for the universe of 1,542,555 registered micro, small and medium enterprises (MSMEs) with known founding dates, spanning all 29 states in India. To our knowledge, this is the first study of its kind to quantify and characterize the quality of entrepreneurship in India based on cohort growth outcomes and firm characteristics at the time of founding. Methodologically, we define and estimate the probability of firms achieving two types of growth outcomes: attaining a “public” corporation status within a set timeframe after founding (5-years, 10-years, 15-years), and achieving a set annual employee growth rate. We find that firms’ cluster status at the time of founding predicted 58% higher probability of going “public” within 10 years, the original purchase value of assets predicted 62% higher probability of going public and 66% higher probability of employee growth, and that being in an urban district predicted 35% lower probability of going public and 33% lower probability of achieving employee growth. We then measure entrepreneurial quality using the results of our predictive models to calculate the Entrepreneurial Quality Index (EQI) and the Regional Entrepreneurship Cohort Potential Index (RECPI). We map the spatial distribution of entrepreneurial quality in India by EQI and RECPI, compare to patterns in the U.S., and propose directions for future research.

Keywords: entrepreneurship; entrepreneurial quality; entrepreneurial performance; India

JEL Classification: D22; D23; M13