IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v67y2020icp29-36.html
   My bibliography  Save this article

The impact of regulatory quality on business venturing: A semi-parametric approach

Author

Listed:
  • Polemis, Michael L.
  • Stengos, Thanasis

Abstract

We study the effects of regulatory quality on entrepreneurial activity in 30 OECD countries through the lens of a partially linear panel data model. We argue that there is a nonmonotonic “inverted-U shaped” curve between regulatory quality and total early-stage entrepreneurship activity lending support to the theory of pubic choice. Moreover, the empirical findings postulate that a deterioration in the effectiveness and enforcement of government regulations (i.e., government inability to formulate and implement sound policies, onerous regulation, etc.) harm setting up a business activity within the OECD countries. Our findings survive robustness checks under different dimensions of entrepreneurship (nascent, new and established entrepreneurs) and endogeneity bias. Lastly, these results have important implications for policy makers and government officials in promoting effective regulatory measures to enhance entrepreneurial activity.

Suggested Citation

  • Polemis, Michael L. & Stengos, Thanasis, 2020. "The impact of regulatory quality on business venturing: A semi-parametric approach," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 29-36.
    • Handle: RePEc:eee:ecanpo:v:67:y:2020:i:c:p:29-36
    DOI: 10.1016/j.eap.2020.05.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592620301508
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2020.05.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Estrin, Saul & Meyer, Klaus E. & Nielsen, Bo B. & Nielsen, Sabina, 2016. "Home country institutions and the internationalization of state owned enterprises: A cross-country analysis," Journal of World Business, Elsevier, vol. 51(2), pages 294-307.
    2. Michael Polemis, 2019. "Is the effect of corruption on entrepreneurial activity nonmonotonic? A semi-parametric panel data analysis," Economics Bulletin, AccessEcon, vol. 39(4), pages 2976-2989.
    3. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    4. Philippe Aghion, 2017. "Entrepreneurship and growth: lessons from an intellectual journey," PSE-Ecole d'économie de Paris (Postprint) halshs-01599618, HAL.
    5. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
    6. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472, Elsevier.
    7. Anokhin, Sergey & Schulze, William S., 2009. "Entrepreneurship, innovation, and corruption," Journal of Business Venturing, Elsevier, vol. 24(5), pages 465-476, September.
    8. Philippe Aghion, 2017. "Entrepreneurship and growth: lessons from an intellectual journey," Post-Print halshs-01599618, HAL.
    9. Michael A Witt & Arie Y Lewin, 2007. "Outward foreign direct investment as escape response to home country institutional constraints," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 579-594, July.
    10. Richard F. J. Haans & Constant Pieters & Zi-Lin He, 2016. "Thinking about U: Theorizing and testing U- and inverted U-shaped relationships in strategy research," Strategic Management Journal, Wiley Blackwell, vol. 37(7), pages 1177-1195, July.
    11. Boisot, Max & Meyer, Marshall W., 2008. "Which Way through the Open Door? Reflections on the Internationalization of Chinese Firms," Management and Organization Review, Cambridge University Press, vol. 4(3), pages 349-365, November.
    12. Rammal, Hussain Gulzar & Zurbruegg, Ralf, 2006. "The impact of regulatory quality on intra-foreign direct investment flows in the ASEAN markets," International Business Review, Elsevier, vol. 15(4), pages 401-414, August.
    13. Vincenzo Verardi & Nicolas Debarsy, 2012. "Robinson's square root of N consistent semiparametric regression estimator in Stata," Stata Journal, StataCorp LP, vol. 12(4), pages 726-735, December.
    14. Dustin Chambers & Jonathan Munemo, 2019. "Regulations, institutional quality and entrepreneurship," Journal of Regulatory Economics, Springer, vol. 55(1), pages 46-66, February.
    15. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    16. Kottaridi, Constantina & Giakoulas, Dimitris & Manolopoulos, Dimitris, 2019. "Escapism FDI from developed economies: The role of regulatory context and corporate taxation," International Business Review, Elsevier, vol. 28(1), pages 36-47.
    17. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-954, July.
    18. Kasper, Wolfgang, 1994. "Institutional Innovation and the Calculus of World Competitiveness," Economic Analysis and Policy, Elsevier, vol. 24(1), pages 37-55.
    19. James B. Bailey & Diana W. Thomas, 2017. "Regulating away competition: the effect of regulation on entrepreneurship and employment," Journal of Regulatory Economics, Springer, vol. 52(3), pages 237-254, December.
    20. Fatih Macit, 2010. "Labor Market Institutions and Wage and Inflation Dynamics," Economic Analysis and Policy, Elsevier, vol. 40(3), pages 393-410, December.
    21. Max Boisot & Marshall W. Meyer, 2008. "Which Way through the Open Door? Reflections on the Internationalization of Chinese Firms," Management and Organization Review, The International Association for Chinese Management Research, vol. 4(3), pages 349-365, November.
    22. Axel Dreher & Martin Gassebner, 2013. "Greasing the wheels? The impact of regulations and corruption on firm entry," Public Choice, Springer, vol. 155(3), pages 413-432, June.
    23. Mohamadi, Ashkan & Peltonen, Juhana & Wincent, Joakim, 2017. "Government efficiency and corruption: A country-level study with implications for entrepreneurship," Journal of Business Venturing Insights, Elsevier, vol. 8(C), pages 50-55.
    24. Lyssiotou, Panayiota & Pashardes, Panos & Stengos, Thanasis, 1999. "Testing the rank of Engel curves with endogenous expenditure," Economics Letters, Elsevier, vol. 64(1), pages 61-65, July.
    25. Ketteni, Elena & Kottaridi, Constantina, 2019. "The impact of regulations on the FDI-growth nexus within the institution-based view: A nonlinear specification with varying coefficients," International Business Review, Elsevier, vol. 28(3), pages 415-427.
    26. Mian Dai & Qihong Liu & Konstantinos Serfes, 2014. "Is the Effect of Competition on Price Dispersion Nonmonotonic? Evidence from the U.S. Airline Industry," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 161-170, March.
    27. Philippe Aghion, 2017. "Entrepreneurship and growth: lessons from an intellectual journey," Small Business Economics, Springer, vol. 48(1), pages 9-24, January.
    28. Spyros Vliamos & Nickolaos Tzeremes, 2012. "Factors Influencing Entrepreneurial Process and Firm Start-Ups: Evidence from Central Greece," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 3(3), pages 250-264, September.
    29. Rajeev K. Goel & James W. Saunoris, 2019. "International corruption and its impacts across entrepreneurship types," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 40(5), pages 475-487, July.
    30. Hogan, W. P., 2003. "Taxing International Financial Institutions," Economic Analysis and Policy, Elsevier, vol. 33(2), pages 293-306, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ahmadi, Amal & Soga, Lebene Richmond, 2022. "To be or not to be: Latent entrepreneurship, the networked agent, and the fear factor," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    2. Enyang Besong Susan & Manases Mbengwor Natu, 2023. "Re-imagining the Gender Gap in Economic Participation and Opportunities: Assessing the Link Between Sustainable Development and Gender Equality in Some African Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 169(3), pages 817-845, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Polemis, 2019. "Is the effect of corruption on entrepreneurial activity nonmonotonic? A semi-parametric panel data analysis," Economics Bulletin, AccessEcon, vol. 39(4), pages 2976-2989.
    2. Dustin Chambers & Jonathan Munemo, 2019. "Regulations, institutional quality and entrepreneurship," Journal of Regulatory Economics, Springer, vol. 55(1), pages 46-66, February.
    3. Chambers, Dustin & Munemo, Jonathan, 2017. "The Impact of Regulations and Institutional Quality on Entrepreneurship," Working Papers 07629, George Mason University, Mercatus Center.
    4. Jonathan Munemo, 2022. "Do African resource rents promote rent-seeking at the expense of entrepreneurship?," Small Business Economics, Springer, vol. 58(3), pages 1647-1660, March.
    5. Zoltan J. Acs & Saul Estrin & Tomasz Mickiewicz & László Szerb, 2018. "Entrepreneurship, institutional economics, and economic growth: an ecosystem perspective," Small Business Economics, Springer, vol. 51(2), pages 501-514, August.
    6. Jonathan Munemo, 2018. "Entrepreneurial Success in Africa: How Relevant Are Foreign Direct Investment and Financial Development?," African Development Review, African Development Bank, vol. 30(4), pages 372-385, December.
    7. Farzana Chowdhury & David B. Audretsch, 2021. "Do corruption and regulations matter for home country nascent international entrepreneurship?," The Journal of Technology Transfer, Springer, vol. 46(3), pages 720-759, June.
    8. Lucas, David & Boudreaux, Christopher, 2018. "Federal Regulation, Job Creation, and the Moderating Effect of State Economic Freedom," MPRA Paper 92593, University Library of Munich, Germany.
    9. Chen, Xuchang & Wu, Changqi, 2023. "Subnational social trust and the internationalization of emerging market firms," Journal of Business Research, Elsevier, vol. 158(C).
    10. Alfredo Monte & Sara Moccia & Luca Pennacchio, 2022. "Regional entrepreneurship and innovation: historical roots and the impact on the growth of regions," Small Business Economics, Springer, vol. 58(1), pages 451-473, January.
    11. Wim Naudé & Stephanié Rossouw, 2010. "Early international entrepreneurship in China: Extent and determinants," Journal of International Entrepreneurship, Springer, vol. 8(1), pages 87-111, March.
    12. Pourya Darnihamedani & Joern Hendrich Block & Jolanda Hessels & Aram Simonyan, 2018. "Taxes, start-up costs, and innovative entrepreneurship," Small Business Economics, Springer, vol. 51(2), pages 355-369, August.
    13. Fiona Sussan & Zoltan J. Acs, 2017. "The digital entrepreneurial ecosystem," Small Business Economics, Springer, vol. 49(1), pages 55-73, June.
    14. Jian, Jianhui & Fan, Xiaojie & Zhao, Shiyong & Zhou, Dong, 2021. "Business creation, innovation, and economic growth: Evidence from China’s economic transition, 1978–2017," Economic Modelling, Elsevier, vol. 96(C), pages 371-378.
    15. John A. Dove, 2023. "One size fits all? The differential impact of federal regulation on early-stage entrepreneurial activity across US states," Journal of Regulatory Economics, Springer, vol. 63(1), pages 57-73, April.
    16. David S. Lucas & Christopher J. Boudreaux, 2019. "The Interdependence of Hierarchical Institutions: Federal Regulation, Job Creation, and the Moderating Effect of State Economic Freedom," Papers 1903.02924, arXiv.org.
    17. Christopher Boudreaux & Anand Jha & Monica Escaleras, 2021. "Weathering the Storm: How Foreign Aid and Institutions Affect Entrepreneurship Following Natural Disasters," Papers 2104.12008, arXiv.org.
    18. Robin Douhan & Magnus Henrekson, 2010. "Entrepreneurship and second-best institutions: going beyond Baumol’s typology," Journal of Evolutionary Economics, Springer, vol. 20(4), pages 629-643, August.
    19. Maksim Belitski & Farzana Chowdhury & Sameeksha Desai, 2016. "Taxes, corruption, and entry," Small Business Economics, Springer, vol. 47(1), pages 201-216, June.
    20. Qian, Xinbei & Huang, Liangxiong & Wang, Xianbin & Wang, Shuqi, 2022. "Detecting pivotal countries of China's OFDI in the “Belt and Road” initiative: The perspective of similarity of doing business," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 296-311.

    More about this item

    Keywords

    Entrepreneurship; Regulation; Nonlinearities; Institutions; OECD;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:67:y:2020:i:c:p:29-36. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.