Determinants of the Prevalence of Start-Ups and High-Growth Firms

37 Pages Posted: 5 Jul 2007

See all articles by Magnus Henrekson

Magnus Henrekson

Research Institute of Industrial Economics (IFN)

Per Davidsson

Queensland University of Technology - Brisbane Graduate School of Business

Abstract

The purpose of this study is to identify key institutional determinants of firm emergence and growth. We do this using various types of data from Sweden. A characterization of a number of institutions and policy measures shows that they are likely to have contributed to an environment that discourages entrepreneurial activity and firm growth. Aspects dealt with include: missing arenas for entrepreneurship in the care sectors and for household-related services, taxation of entrepreneurial income, incentives for wealth accumulation, wage-setting institutions and labor market regulations. Using original data, we provide evidence of a low prevalence of nascent entrepreneurs and a small net employment contribution by high-growth firms. We admit that indisputable evidence for the effects of institutional arrangements is almost impossible to establish. However, the consistency of our theoretical arguments and empirical data makes a strong case for the notion that the Swedish case illustrates the costs of giving too little weight to economic renewal in policy making.

Keywords: Business taxation, Entrepreneurship, High-growth firms, Industrial policy, Nascent entrepreneurs, Swedish model

JEL Classification: M13, L52, J21, H30

Suggested Citation

Henrekson, Magnus and Davidsson, Per, Determinants of the Prevalence of Start-Ups and High-Growth Firms. Small Business Economics, Vol. 19, No. 2, 2002. Available at SSRN: https://ssrn.com/abstract=998263

Magnus Henrekson (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
Grevgatan 34
Stockholm, SE-10215
Sweden
+46-8-6654502 (Phone)
+46-8-6654599 (Fax)

HOME PAGE: http://www.ifn.se/mh

Per Davidsson

Queensland University of Technology - Brisbane Graduate School of Business ( email )

Brisbane
Australia
+61 7 3864 2051 (Phone)
+61 7 3864 1299 (Fax)

HOME PAGE: http://www.qut.edu.au/ph_server_query.do

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