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International Financial Integration and Entrepreneurship

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Author Info
Laura Alfaro
Andrew Charlton

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Abstract

We explore the relation between international financial integration and the level ofentrepreneurial activity in a country. Using a unique data set of approximately 24 million firmsin nearly 100 countries in 1999 and 2004, we find suggestive evidence that internationalfinancial integration has been associated with higher levels of entrepreneurial activity. Ourresults are robust to using various proxies for entrepreneurial activity such as entry, size, andskewness of the firm-size distribution; controlling for level of economic development,regulation, institutional constraints, and other variables that might affect the businessenvironment; and using different empirical specifications. We further explore various channelsthrough which international financial integration can affect entrepreneurship (a foreign directinvestment channel and a capital/credit availability channel) and provide consistent evidence tosupport our results.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0755.

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Date of creation: Oct 2006
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Handle: RePEc:cep:cepdps:dp0755

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Related research
Keywords: international financial integration; capital mobility; entrepreneurship; firm entry; capital controls; foreign direct investment;

Find related papers by JEL classification:
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
F35 - International Economics - - International Finance - - - Foreign Aid
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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References listed on IDEAS
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Anthony McDonnell & Jonathan Lavelle & Patrick Gunnigle & David G. Collings, 2007. "Management Research on Multinational Corporations: A Methodological Critique," The Economic and Social Review, Economic and Social Studies, vol. 38(2), pages 234-258. [Downloadable!]
  2. Kristina Nyström, 2008. "The institutions of economic freedom and entrepreneurship: evidence from panel data," Public Choice, Springer, vol. 136(3), pages 269-282, September. [Downloadable!] (restricted)
    Other versions:
  3. Tullio Jappelli & Marco Pagano, 2008. "Financial Market Integration Under EMU," CSEF Working Papers 197, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
    Other versions:
  4. Philippe Aghion & Thibault Fally & Stefano Scarpetta, 2007. "Credit Constraints as a Barrier to the Entry and Post-Entry Growth of Firms," IZA Discussion Papers 3237, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Kerstin Gerling, 2008. "The Real Consequences of Financial Market Integration when Countries Are Heterogeneous," Working Papers 141, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
  6. Silvia Ardagna & Annamaria Lusardi, 2008. "Explaining International Differences in Entrepreneurship: The Role of Individual Characteristics and Regulatory Constraints," NBER Working Papers 14012, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Nyström, Kristina, 2008. "Regional Institutional Environment and Swedish Regional New Firm Formation," Working Paper Series in Economics and Institutions of Innovation 142, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
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