Do Stringent Bankruptcy Laws Always Deter Entrepreneurial Activity? A Study of Cultural Influences

Abstract

Stringent bankruptcy laws are generally understood to increase the costs of failure and thus not conducive for entrepreneurship. In this paper, theory is developed and tested exploring the moderating influences of the dimensions of culture — individualism — collectivism, masculinity– femininity, uncertainty avoidance, and power distance. Results of this study, from conditional fixed effects Poisson regressions, support that stringent bankruptcy laws are positively associated with the levels of entrepreneurial activity in certain cultural contexts.

Keywords: Entrepreneurship, entrepreneurial activity, bankruptcy laws, culture, cultural dimensions

JEL Classification: M