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International financial integration and entrepreneurship

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  • Laura Alfaro
  • Andrew Charlton

Abstract

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

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File URL: http://eprints.lse.ac.uk/19796/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 19796.

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Length: 62 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:ehl:lserod:19796

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Related research

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

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Citations

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Cited by:
  1. Kerstin Gerling, 2008. "The Real Consequences of Financial Market Integration when Countries Are Heterogeneous," Working Papers 141, Oesterreichische Nationalbank (Austrian Central Bank).
  2. Tullio Jappelli & Marco Pagano, 2008. "Financial Market Integration under EMU," European Economy - Economic Papers 312, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  3. 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.
  4. Mitton, Todd, 2008. "Institutions and concentration," Journal of Development Economics, Elsevier, vol. 86(2), pages 367-394, June.
  5. Scarpetta, Stefano & Fally, Thibault & Aghion, Philippe, 2007. "Credit Constraints as a Barrier to the Entry and Post-Entry Growth of Firms," Scholarly Articles 4554208, Harvard University Department of Economics.
  6. Eichengreen, Barry & Gullapalli, Rachita & Panizza, Ugo, 2011. "Capital account liberalization, financial development and industry growth: A synthetic view," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1090-1106, October.
  7. Levchenko, Andrei A. & Rancière, Romain & Thoenig, Mathias, 2008. "Growth and Risk at the Industry Level: the Real Effects of Financial Liberalization," CEPR Discussion Papers 6715, C.E.P.R. Discussion Papers.
  8. Fernanda Llussa, 2011. "Determinants of Entrepreneurship: Are Women Different?," FEUNL Working Paper Series wp555, Universidade Nova de Lisboa, Faculdade de Economia.
  9. 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.
  10. Silvia Ardagna & Annamaria Lusardi, 2009. "Where does regulation hurt? Evidence from new businesses across countries," NBER Working Papers 14747, National Bureau of Economic Research, Inc.
  11. Kristina Nyström, 2008. "The institutions of economic freedom and entrepreneurship: evidence from panel data," Public Choice, Springer, vol. 136(3), pages 269-282, September.
  12. Silvia Ardagna & Annamaria Lusardi, 2010. "Explaining International Differences in Entrepreneurship: The Role of Individual Characteristics and Regulatory Constraints," NBER Chapters, in: International Differences in Entrepreneurship, pages 17-62 National Bureau of Economic Research, Inc.
  13. 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.
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