Testing of Persistence in Firm Entry by Size, Sector, and Location: Case of Iran

This paper aims to investigate the stationary properties of entrepreneurship capital in the Iranian business sector. The investigation is conducted based on firm size (micro, small and medium, and large), sector (ISIC classification), and location (31 provinces) over the period 1981-2021. To achieve the purpose of the paper, we apply the Lagrange Multiplier (LM) unit root test with structural breaks. The results of our study confirm the stationarity of entrepreneurship for the majority of our categorizations. Therefore, entrepreneurs' willingness to start a business is temporarily affected by sharp shocks, suggesting that the entrepreneurship trends in these categories will eventually revert to their long-run equilibrium. However, the time series of entrepreneurship in provinces such as Zanjan and Lorestan, as well as in the electrical machines and devices (code 31) sector, remain permanent. These findings can assist policymakers in each sector and location in designing effective policies to promote entrepreneurial activities. The economic literature reveals that empirical studies on the persistence of entrepreneurship have received relatively less attention in the context of emerging and resource-based economies, compared to the increasing focus on them in developed countries. Therefore, to address this gap, this paper aims to extend the current empirical literature by presenting new evidence for the case of Iran, which has an emerging and resource-based economy.