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Productive entrepreneurship and the effectiveness of insolvency legislation: a cross-country study

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Listed:
  • Kun Fu

    (Loughborough University)

  • Karl Wennberg

    (Linköping University, Sweden)

  • Björn Falkenhall

    (Swedish Pharmacy Association)

Abstract

This paper studies the association between the effectiveness of insolvency regulations and entrepreneurship using multilevel modeling of about 300,000 individuals in 27 countries over the 2005–2010 period. We investigate the relationship between three different measures of “resolving insolvency” (time, cost, and recovery rate) from the World Bank and four different measures of entrepreneurship from the Global Entrepreneurship Monitor, controlling for relevant individual- and country-level facets. We find that opportunity-driven and innovation-oriented entrepreneurs are more severely affected by onerous insolvency regulations than necessity-motivated entrepreneurs. However, entrepreneurs envisioning rapid employment growth are not affected by onerous insolvency regulations. We discuss contributions to comparative entrepreneurship research and public policy.

Suggested Citation

  • Kun Fu & Karl Wennberg & Björn Falkenhall, 2020. "Productive entrepreneurship and the effectiveness of insolvency legislation: a cross-country study," Small Business Economics, Springer, vol. 54(2), pages 383-404, February.
    • Handle: RePEc:kap:sbusec:v:54:y:2020:i:2:d:10.1007_s11187-018-0040-6
    DOI: 10.1007/s11187-018-0040-6
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    2. Luca Farè & David B. Audretsch & Marcus Dejardin, 2023. "Does democracy foster entrepreneurship?," Small Business Economics, Springer, vol. 61(4), pages 1461-1495, December.
    3. Sadeghi, Ali & Kibler, Ewald, 2022. "Do bankruptcy laws matter for entrepreneurship? A Synthetic Control Method analysis of a bankruptcy reform in Finland," Journal of Business Venturing Insights, Elsevier, vol. 18(C).
    4. Greta Falavigna & Roberto Ippoliti, 2022. "Financial constraints, investments, and environmental strategies: An empirical analysis of judicial barriers," Business Strategy and the Environment, Wiley Blackwell, vol. 31(5), pages 2002-2018, July.
    5. Ioscha Cordier & Marco Bade, 2023. "The relationship between business regulation and nascent and young business entrepreneurship revisited," Small Business Economics, Springer, vol. 61(2), pages 587-616, August.
    6. Luca Fare & Marcus Dejardin & Eric Toulemonde, 2023. "Bankruptcy recovery rate and small businesses' innovation," DeFiPP Working Papers 2302, University of Namur, Development Finance and Public Policies.
    7. Teodora Roman & Nicu Marcu & Valentina Diana Rusu & Erika Maria Doacă & Adelina Andreea Siriteanu, 2023. "Tax Payment and the Performance of SMEs: A Longitudinal Analysis on EU Countries," Sustainability, MDPI, vol. 15(2), pages 1-15, January.
    8. Estevão, João & Lopes, José Dias & Penela, Daniela, 2022. "The importance of the business environment for the informal economy: Evidence from the Doing Business ranking," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    9. Błażej Prusak & Sylwia Morawska & Michał Łukowski & Przemysław Banasik, 2022. "The impact of bankruptcy regimes on entrepreneurship and innovation. Is there any relationship?," International Entrepreneurship and Management Journal, Springer, vol. 18(1), pages 473-498, March.
    10. ben Jabeur, Sami & Mefteh-Wali, Salma & Carmona, Pedro, 2021. "The impact of institutional and macroeconomic conditions on aggregate business bankruptcy," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 108-119.
    11. Miao, Chao & Gast, Johanna & Laouiti, Rahma & Nakara, Walid, 2022. "Institutional factors, religiosity, and entrepreneurial activity: A quantitative examination across 85 countries," World Development, Elsevier, vol. 149(C).

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    More about this item

    Keywords

    Entrepreneurship; Bankruptcy; Effectiveness of insolvency laws; Cross-country;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • P37 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Legal
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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