IDEAS home Printed from https://ideas.repec.org/a/kap/sbusec/v61y2023i3d10.1007_s11187-022-00727-1.html
   My bibliography  Save this article

Right of association and new business entry: country-level evidence from the market sector

Author

Listed:
  • Pankaj C. Patel

    (Villanova University)

  • Cornelius A. Rietveld

    (Erasmus University Rotterdam)

Abstract

Labor market institutions (LMIs) could enable new firm entry by lowering burdens to attracting and retaining human capital or restrict new firm entry by increasing concerns of additional demands on ventures facing liabilities of newness and smallness. In this study, we focus on the LMI of the right of association, and whether its relationship with new business entry depends on the vertical ordering of bargaining (represented in the centralization of collective bargaining) or the horizontal synchronization of wage-setting (represented in the coordination of wage-setting). In a panel of 44 countries covering the period 2005–2019, we find that the right of association in the market sector is positively associated with new business entry; however, with increasing centralization of collective bargaining, the association becomes negative. Coordination of wage-setting does not significantly affect the relationship between the right of association and new business entry. The results are robust to accounting for both serial correlation and cross-sectional correlation in the panel regressions and carry implications for policymakers regarding the effects of LMIs on new business creation.

Suggested Citation

  • Pankaj C. Patel & Cornelius A. Rietveld, 2023. "Right of association and new business entry: country-level evidence from the market sector," Small Business Economics, Springer, vol. 61(3), pages 1161-1177, October.
    • Handle: RePEc:kap:sbusec:v:61:y:2023:i:3:d:10.1007_s11187-022-00727-1
    DOI: 10.1007/s11187-022-00727-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11187-022-00727-1
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11187-022-00727-1?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

    for a different version of it.

    References listed on IDEAS

    as
    1. Magnus Henrekson, 2020. "How labor market institutions affect job creation and productivity growth," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-38, January.
    2. repec:spo:wpmain:info:hdl:2441/2cnlir7arl8aaqa8hvkgkr7mqn is not listed on IDEAS
    3. Ana Maria Oviedo & Mark R. Thomas & Kamer Karakurum-Ozdemir, 2009. "Economic Informality : Causes, Costs, and Policies - A Literature Survey," World Bank Publications - Books, The World Bank Group, number 5917.
    4. Robert M. Solow, 2016. "Resources and Economic Growth," The American Economist, Sage Publications, vol. 61(1), pages 52-60, March.
    5. Soskice, David, 1990. "Wage Determination: The Changing Role of Institutions in Advanced Industrialized Countries," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 6(4), pages 36-61, Winter.
    6. Richard B. Freeman, 2007. "Labor Market Institutions Around the World," NBER Working Papers 13242, National Bureau of Economic Research, Inc.
    7. Holmlund, Bertil, 2014. "What do labor market institutions do?," Labour Economics, Elsevier, vol. 30(C), pages 62-69.
    8. Jörn H. Block & Christian O. Fisch & James Lau & Martin Obschonka & André Presse, 2019. "How Do Labor Market Institutions Influence the Preference to Work in Family Firms? A Multilevel Analysis Across 40 Countries," Entrepreneurship Theory and Practice, , vol. 43(6), pages 1067-1093, November.
    9. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    10. Unger, Jens M. & Rauch, Andreas & Frese, Michael & Rosenbusch, Nina, 2011. "Human capital and entrepreneurial success: A meta-analytical review," Journal of Business Venturing, Elsevier, vol. 26(3), pages 341-358, May.
    11. Murtin, Fabrice & de Serres, Alain & Hijzen, Alexander, 2014. "Unemployment and the coverage extension of collective wage agreements," European Economic Review, Elsevier, vol. 71(C), pages 52-66.
    12. Fernando Rios-Avila, 2017. "Unions and Economic Performance in Developing Countries: Case Studies from Latin America," Revista Ecos de Economía, Universidad EAFIT, vol. 21(44), pages 4-36.
    13. Andrea Garnero, 2021. "The impact of collective bargaining on employment and wage inequality: Evidence from a new taxonomy of bargaining systems," European Journal of Industrial Relations, , vol. 27(2), pages 185-202, June.
    14. repec:oup:ecpoli:v:29:y:2014:i:80:p:603-637 is not listed on IDEAS
    15. Eren, Ozkan & Onda, Masayuki & Unel, Bulent, 2019. "Effects of FDI on entrepreneurship: Evidence from Right-to-Work and non-Right-to-Work states," Labour Economics, Elsevier, vol. 58(C), pages 98-109.
    16. Alain de Serres & Fabrice Murtin, 2014. "Unemployment at risk: the policy determinants of labour market exposure to economic shocks [Labor market institutions and the business cycle: unemployment rigidities vs wage rigidities]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 29(80), pages 603-637.
    17. David G. Blanchflower & Richard B. Freeman, 1993. "Did the Thatcher Reforms Change British Labour Performance?," NBER Working Papers 4384, National Bureau of Economic Research, Inc.
    18. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    19. John Driffill, 2006. "The Centralization of Wage Bargaining Revisited: What Have we Learnt?," Journal of Common Market Studies, Wiley Blackwell, vol. 44(4), pages 731-756, November.
    20. repec:bla:ecpoli:v:29:y:2014:i:80:p:603-637 is not listed on IDEAS
    21. Dimo Dimov, 2010. "Nascent Entrepreneurs and Venture Emergence: Opportunity Confidence, Human Capital, and Early Planning," Journal of Management Studies, Wiley Blackwell, vol. 47(6), pages 1123-1153, September.
    22. repec:hal:spmain:info:hdl:2441/6jq9vl5fsi9sqbrqvnnqn21dcs is not listed on IDEAS
    23. Kristina Nyström & Gulzat Elvung, 2014. "New firms and labor market entrants: Is there a wage penalty for employment in new firms?," Small Business Economics, Springer, vol. 43(2), pages 399-410, August.
    24. M. Diane Burton & Robert W. Fairlie & Donald Siegel, 2019. "Introduction to a Special Issue on Entrepreneurship and Employment: Connecting Labor Market Institutions, Corporate Demography, and Human Resource Management Practices," ILR Review, Cornell University, ILR School, vol. 72(5), pages 1050-1064, October.
    25. Oswald, Andrew J, 1979. "Wage Determination in an Economy with Many Trade Unions," Oxford Economic Papers, Oxford University Press, vol. 31(3), pages 369-385, November.
    26. Ahlquist, John S., 2010. "Building Strategic Capacity: The Political Underpinnings of Coordinated Wage Bargaining," American Political Science Review, Cambridge University Press, vol. 104(1), pages 171-188, February.
    27. Nils BRAAKMANN & Bernd BRANDL, 2021. "The performance effects of collective and individual bargaining: A comprehensive and granular analysis of the effects of different bargaining systems on company productivity," International Labour Review, International Labour Organization, vol. 160(1), pages 43-64, March.
    28. David Blanchflower & Richard Freeman, 1993. "Did the Thatcher Reforms Change British Labour Market Performance?," CEP Discussion Papers dp0168, Centre for Economic Performance, LSE.
    29. Lars Calmfors, 1993. "Centralisation of Wage Bargaining and Macroeconomic Performance: A Survey," OECD Economics Department Working Papers 131, OECD Publishing.
    30. Gimenez-Fernandez, Elena M. & Sandulli, Francesco D. & Bogers, Marcel, 2020. "Unpacking liabilities of newness and smallness in innovative start-ups: Investigating the differences in innovation performance between new and older small firms," Research Policy, Elsevier, vol. 49(10).
    31. Michael Pries & Richard Rogerson, 2005. "Hiring Policies, Labor Market Institutions, and Labor Market Flows," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 811-839, August.
    32. repec:hal:spmain:info:hdl:2441/2cnlir7arl8aaqa8hvkgkr7mqn is not listed on IDEAS
    33. Siepel, Josh & Cowling, Marc & Coad, Alex, 2017. "Non-founder human capital and the long-run growth and survival of high-tech ventures," Technovation, Elsevier, vol. 59(C), pages 34-43.
    34. Magnus Henrekson & Tino Sanandaji, 2020. "Measuring Entrepreneurship: Do Established Metrics Capture Schumpeterian Entrepreneurship?," Entrepreneurship Theory and Practice, , vol. 44(4), pages 733-760, July.
    35. repec:spo:wpmain:info:hdl:2441/6jq9vl5fsi9sqbrqvnnqn21dcs is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    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. Andrea Garnero, 2021. "The impact of collective bargaining on employment and wage inequality: Evidence from a new taxonomy of bargaining systems," European Journal of Industrial Relations, , vol. 27(2), pages 185-202, June.
    2. Simon Sturn, 2011. "Labour market regimes and unemployment in OECD countries," IMK Working Paper 6-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
    4. Joanna Tyrowicz, 2009. "When Eastern Labour Markets Enter Western Europe CEECs. Labour Market Institutions upon Euro Zone Accession," Working Papers 2009-03, Faculty of Economic Sciences, University of Warsaw.
    5. Marwa Sahnoun & Chokri Abdennadher, 2018. "The assessment of active labor market policies: evidence from OECD countries," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 257-283, August.
    6. Simon STURN, 2013. "Are corporatist labour markets different? Labour market regimes and unemployment in OECD countries," International Labour Review, International Labour Organization, vol. 152(2), pages 237-254, June.
    7. repec:spo:wpecon:info:hdl:2441/6120 is not listed on IDEAS
    8. Horst Feldmann, 2013. "Technological unemployment in industrial countries," Journal of Evolutionary Economics, Springer, vol. 23(5), pages 1099-1126, November.
    9. Ramos, Raul & Sanromá, Esteban & Simón, Hipólito, 2022. "Collective bargaining levels, employment and wage inequality in Spain," Journal of Policy Modeling, Elsevier, vol. 44(2), pages 375-395.
    10. Sachs, Andreas, 2010. "A Bayesian approach to determine the impact of institutions on the unemployment rate," ZEW Discussion Papers 10-058, ZEW - Leibniz Centre for European Economic Research.
    11. repec:spo:wpmain:info:hdl:2441/6120 is not listed on IDEAS
    12. Bart Hobijn & Ayşegül Şahin, 2013. "Firms And Flexibility," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 922-940, January.
    13. Doménech, Rafael & Garcí­a, José Ramón, 2008. "Unemployment, taxation and public expenditure in OECD economies," European Journal of Political Economy, Elsevier, vol. 24(1), pages 202-217, March.
    14. Aidt, T.S. & Tzannatos, Z., 2005. "The Cost and Benefits of Collective Bargaining," Cambridge Working Papers in Economics 0541, Faculty of Economics, University of Cambridge.
    15. Sebastian Weber, 2006. "Labor Market Structures, Trade and their Effect on Unemployment: A Theoretical Analysis and Empirical Investigation," IHEID Working Papers 22-2006, Economics Section, The Graduate Institute of International Studies.
    16. Sumon Kumar Bhaumik & Richard Frensch & Stephan Huber, 2021. "Political economy of labor market institutions in a globalised era," Working Papers 391, Leibniz Institut für Ost- und Südosteuropaforschung (Leibniz Institute for East and Southeast European Studies).
    17. Boeri, Tito & Macis, Mario, 2008. "Do Unemployment Benefits Promote or Hinder Structural Change?," IZA Discussion Papers 3371, Institute of Labor Economics (IZA).
    18. Aurélien Gaimon & Vincent Lapegue & Paola Veroni & Noé N'Semi & Frédéric Reynés & Maël Theulière, 2007. "Does the interaction between shocks and institutions solve the OECD unemployment puzzle ? A theoretical and empirical appraisal," Working Papers hal-03602950, HAL.
    19. repec:spo:wpmain:info:hdl:2441/9d007rc2q9huruni0kde2vr73 is not listed on IDEAS
    20. Franz, Wolfgang, 1995. "Die Lohnfindung in Deutschland in einer internationalen Perspektive: Ist das deutsche System ein Auslaufmodell?," Discussion Papers 24, University of Konstanz, Center for International Labor Economics (CILE).
    21. Ronchi, Maddalena & di Mauro, Filippo, 2017. "Wage Bargaining Regimes and Firms' Adjustments to the Great Recession," IWH-CompNet Discussion Papers 1/2017, Halle Institute for Economic Research (IWH).
    22. repec:hal:wpspec:info:hdl:2441/6120 is not listed on IDEAS
    23. MacLeod, W. Bentley, 2011. "Great Expectations: Law, Employment Contracts, and Labor Market Performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 18, pages 1591-1696, Elsevier.
    24. Grigoli, Francesco & Koczan, Zsoka & Topalova, Petia, 2020. "Automation and labor force participation in advanced economies: Macro and micro evidence," European Economic Review, Elsevier, vol. 126(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

    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:kap:sbusec:v:61:y:2023:i:3:d:10.1007_s11187-022-00727-1. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.