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Entrepreneurship and Culture pp 55–77Cite as

Culture, Political Institutions and the Regulation of Entry

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Abstract

This paper examines the relationship between cultural values, political institutions and government regulation of new firm entry. A series of hypotheses are developed and tested using data coupled from a variety of sources in comparative political economy and cross-cultural psychology for 53 countries. If society’s general attitudes toward uncertainty and power inequality are embedded in its laws and institutions, then such values should mediate the intensity with which economic incentives affect regulatory procedures and outcomes. Empirical results suggest that entry regulation levels are correlated with the way people in different countries deal with uncertainty and accept inequality of power. Moreover, these intrinsic cultural values act as mediators for the correlations between regulatory intensity and economic, political and institutional variables.

Culture, Institutions and the Regulation of Entry (first published as “Culture, Political Institutions and the Regulation of Entry” in Comparative Labor Law & Policy Journal, Vol.28, No.4, 2007)

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Notes

  1. 1.

    A comprehensive version of the data set, including detailed information on the nature of entry regulation procedures for each country and on how specific data collection and assembly problems were dealt with can be found in: http://post.economics.harvard.edu/faculty/laporta/papers/data.pdf.

  2. 2.

    Histograms are not presented here, but are available from the author upon request.

  3. 3.

    www.worldbank.wdionline.com.

  4. 4.

    www.worldbank.org/wbi/governance/govdata2002/.

  5. 5.

    For instance, the correlation between the values of the regulatory quality and the control of corruption indices (averaged over the four observations) for the sample of 53 countries used in the present work is 92,4%. The correlation between the regulatory quality and government effectiveness indices is 92.1%.

  6. 6.

    The high correlation levels between regulatory quality and control of corruption reported above remain if corruption perceptions measures obtained from other sources – such as the corruption perceptions index from Transparency International (http://www.transparency.org) – are used.

  7. 7.

    These authors’ estimates were computed mainly from data in Schneider and Enste (2000).

  8. 8.

    The methodology for the construction of the data reported by these authors can be found in Easterly and Levine (1997).

  9. 9.

    Similar results were achieved when using other variables to account for checks and balances, such as the number of political agents with veto power and the longest tenure of a veto player (also from the DPI).

  10. 10.

    As previously pointed out, the correlation coefficient between regulatory quality and power distance is high and negative (−58%). Since other governance quality indicators such as government effectiveness, voice and accountability and control of corruption are all positively and very significantly correlated with regulatory quality, there will also exist a negative relationship between such indices and power distance/inequality.

  11. 11.

    Evidently, the interaction or moderating effect does not have to assume a linear form. However, this assumption means that the new model with interaction effects will remain linear.

  12. 12.

    F tests results are not reported here. The values for the R2 and the F statistic are presented for each model in Tables 4 and 5.

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Acknowledgments

I am grateful to David Audretsch, Adam Lederer, Amir Licht, Christian Martin and Roy Thurik for useful comments and discussions. I also thank participants at the following events: the Interdisciplinary European Conference on Entrepreneurship Research, University of Amsterdam, February 2005; the Max Planck Institute of Economics Workshop on Entrepreneurship and Culture, Jena, March 2005; and the Conference on Entrepreneurship: Law, Culture and the Labor Market, University of Illinois, Chicago, March 2007. Financial Support from the Portuguese Foundation for Science and Technology (POCTI Program) is gratefully acknowledged.

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  1. IN+, Center for Innovation, Technology and Policy Research, Instituto Superior Técnico, Av. Rovisco Pais, 1049-001, Lisbon, Portugal

    Rui Baptista

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  1. Rui Baptista
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Correspondence to Rui Baptista .

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  1. Fak. Wirtschaftswissenschaften, Universität Jena, Carl-Zeiss-Str. 3, Jena, 07743, Germany

    Andreas Freytag

  2. Econometrisch Instituut, Erasmus Universiteit Rotterdam, Rotterdam, 3000 DR, Netherlands

    Roy Thurik

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Baptista, R. (2010). Culture, Political Institutions and the Regulation of Entry. In: Freytag, A., Thurik, R. (eds) Entrepreneurship and Culture. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-87910-7_4

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