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Availability of Financing, Regulatory Business Costs and National Entrepreneurial Propensity

Author

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  • Yuen Ping Ho

    (Entrepreneurship Centre, National University of Singapore)

  • Poh Kam Wong

    (Entrepreneurship Centre, National University of Singapore)

Abstract

In this paper, we focus on two barriers to entry that may hinder the formation of new firms: capital requirements and regulatory business cost. The contribution of this paper is twofold: we compare the availability of different types of financing sources to address the issue of capital requirement and we utilise a new measure of business cost by constructing a composite index using data from the World Bank’s Doing Business Database. Using cross-sectional data on 37 countries that participated in the 2002 Global Entrepreneurship Monitor, we examine the effect of availability of financing and regulatory business costs on the propensity of three different types of entrepreneurial activity:opportunity-driven, necessity driven and high-growth potential new firm formation. The availability of three types of financing sources is analysed: traditional debt financing, venture capital financing, and informal investments. The findings show that only informal investments significantly influence the propensity to be entrepreneurs. Regulatory business costs were found to deter opportunity driven entrepreneurship, but had no impact on other types of entrepreneurial activity.

Suggested Citation

  • Yuen Ping Ho & Poh Kam Wong, 2005. "Availability of Financing, Regulatory Business Costs and National Entrepreneurial Propensity," Industrial Organization 0504025, University Library of Munich, Germany, revised 03 Aug 2005.
  • Handle: RePEc:wpa:wuwpio:0504025
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    References listed on IDEAS

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    Cited by:

    1. László Szerb & Siri Terjesen & Gábor Rappai, 2007. "Seeding new ventures -- green thumbs and fertile fields: Individual and environmental drivers of informal investment," Venture Capital, Taylor & Francis Journals, vol. 9(4), pages 257-284, April.
    2. Lambert Koch & Marc Grünhagen, 2009. "The value of delays: market- and policy-induced adjustment processes as a motivating factor in dynamic entrepreneurship," Journal of Evolutionary Economics, Springer, vol. 19(5), pages 701-724, October.

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    More about this item

    Keywords

    entrepreneurial activity; financing; venture capital; informal investment; business cost;
    All these keywords.

    JEL classification:

    • L - Industrial Organization

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