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Taxes, start-up costs, and innovative entrepreneurship

Author

Listed:
  • Pourya Darnihamedani

    (Tilburg University)

  • Joern Hendrich Block

    (Erasmus University Rotterdam
    University of Trier)

  • Jolanda Hessels

    (Erasmus University Rotterdam)

  • Aram Simonyan

    (National Academy of Science of the Republic of Armenia)

Abstract

Prior research investigates the role of start-up costs and taxes with regard to entrepreneurship. Yet, little distinction is made regarding the type of entrepreneurship, particularly innovative versus non-innovative entrepreneurship. We shall argue that start-up costs and taxes are associated in different ways with innovative versus non-innovative entrepreneurship. Taxes being recurring costs should mainly relate to innovative entrepreneurship, whereas start-up costs being one-off costs should mainly relate to non-innovative entrepreneurship. Analyzing a dataset of 632,116 individuals, including 43,223 entrepreneurs from 53 countries, we can partially confirm our predictions. Corporate taxes show a negative relationship with innovative entrepreneurship, whereas income taxes seem to have no relationship. High start-up costs have a positive relationship with innovative entrepreneurship, although this finding only holds true in cross-sectional investigations. Our paper contributes to the discussion on how governmental regulation and taxes relate to entrepreneurship.

Suggested Citation

  • 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.
  • Handle: RePEc:kap:sbusec:v:51:y:2018:i:2:d:10.1007_s11187-018-0005-9
    DOI: 10.1007/s11187-018-0005-9
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