Small Business Economics

, Volume 32, Issue 3, pp 259–276 | Cite as

The responsiveness of entrepreneurs to working time regulations

  • Frank Stephen
  • David Urbano
  • Stefan van Hemmen


In this article, we analyse the impact of enforcement practices (proxied by judicial formalism) and the regulation of working time on entrepreneurial activity by opportunity. We find that higher enforcement formalism mitigates the negative impact exerted by rigid working time regulations on the number of entrepreneurs. While it is agreed that regulatory rigidities may increase labour transaction costs, we show that entrepreneurs are less sensitive to labour regulations the higher the level of enforcement formalism in which they operate. Higher formalism is associated with lower enforcing efficiency and lower probability of being punished for transgressing laws. A policy implication is that encouraging labour flexibility might not improve conditions for entrepreneurial activity in procedurally formalist countries. This is due to the fact that, in those countries, flexibility de facto characterises employment relations, no matter what the law says.


Judicial Formalism Observance Compliance Entrepreneur Labour contracts Rigidity of hours Working time Opportunity entrepreneurship GEM 

JEL Classifications

L26 J83 K31 K42 



The authors appreciate helpful comments from David Storey. David Urbano has received financial resources from SEJ2007-60995 (Spanish Ministry of Education and Science) and 2005SGR00858 Catalan Government’s Department for Universities, Research and Information Society), and Stefan van Hemmen from SEJ2004-07530-C04-02/SEJ2007-67895-C04-02 (Spanish Ministry of Education and Science) and 2005SGR00813 (Catalan Government’s Department for Universities, Research and Information Society).


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Copyright information

© Springer Science+Business Media, LLC. 2008

Authors and Affiliations

  • Frank Stephen
    • 1
  • David Urbano
    • 2
  • Stefan van Hemmen
    • 2
  1. 1.University of Manchester – School of LawManchesterUK
  2. 2.Business EconomicsAutonomous University of BarcelonaBellaterraSpain

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