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Social trust and new firm formation: a regional perspective

Author

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  • Carlo Corradini

    (University of Birmingham)

Abstract

This paper aims to contribute to the analysis of informal institutions on entrepreneurship. In particular, we follow a regional perspective to explore the role of social trust as a determinant of new firm formation, enhancing the flow of information and knowledge exchange across spatially embedded relational structures that underpin entrepreneurial processes. Also, we argue this bridging effect of social trust may be subdued in regions with higher levels of economic development characterised by stronger quality of governance and more defined entrepreneurial ecosystems. Combining data from Eurostat and the European Social Survey for over 200 regions across nine EU countries, the paper provides novel empirical evidence that social trust plays a significant role in fostering the formation of new firms. At the same time, the results indicate that the strength of formal institutions and the regional economy exert a critical moderating effect as the importance of social trust on new firm formation progressively increases in regions characterised by decreasing levels of economic development.

Suggested Citation

  • Carlo Corradini, 2022. "Social trust and new firm formation: a regional perspective," Small Business Economics, Springer, vol. 58(1), pages 169-184, January.
    • Handle: RePEc:kap:sbusec:v:58:y:2022:i:1:d:10.1007_s11187-020-00404-1
    DOI: 10.1007/s11187-020-00404-1
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    More about this item

    Keywords

    Social capital; Trust; Institutions; Entrepreneurship; Regional economic development;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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