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Size matters: entrepreneurial entry and government

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  • Ruta Aidis
  • Saul Estrin
  • Tomasz Mickiewicz

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Abstract

We explore the country-specific institutional characteristics likely to influence an individual's decision to become an entrepreneur. We focus on the size of the government, on freedom from corruption, and on 'market freedom' defined as a cluster of variables related to protection of property rights and regulation. We test these relationships by combining country-level institutional indicators for 47 countries with working age population survey data taken from the Global Entrepreneurship Monitor. Our results indicate that entrepreneurial entry is inversely related to the size of the government, and more weakly to the extent of corruption. A cluster of institutional indicators representing 'market freedom' is only significant in some specifications. Freedom from corruption is significantly related to entrepreneurial entry, especially when the richest countries are removed from the sample but unlike the size of government, the results on corruption are not confirmed by country-level fixed effects models.
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Suggested Citation

  • Ruta Aidis & Saul Estrin & Tomasz Mickiewicz, 2012. "Size matters: entrepreneurial entry and government," Small Business Economics, Springer, vol. 39(1), pages 119-139, July.
  • Handle: RePEc:kap:sbusec:v:39:y:2012:i:1:p:119-139
    DOI: 10.1007/s11187-010-9299-y
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    More about this item

    Keywords

    Entrepreneurship; Government; Market freedom; Corruption; L26; P14; P51; P37;

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
    • P37 - Economic Systems - - Socialist Institutions and Their Transitions - - - Legal

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