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Small Business Economics

, Volume 47, Issue 1, pp 139–162 | Cite as

De jure determinants of new firm formation: how the pillars of constitutions influence entrepreneurship

  • Emanuela Carbonara
  • Enrico SantarelliEmail author
  • Hien Thu Tran
Article

Abstract

This paper provides empirical evidence supporting the view that constitutions are the primary and fundamental institutional determinant of entrepreneurship. It shows that some of the provisions contained in national constitutions are positively and significantly associated with a standard measure of entrepreneurial dynamics, namely the rate of new business density. Using for 115 countries a novel dataset containing the characteristics of the constitutions enacted in the world, applying an IV-GMM treatment to deal with the endogeneity of constitutional rules, and controlling for de facto variables, the paper finds that provisions about the right to conduct/establish a business, the right to strike, consumer protection, anti-corruption, and compulsory education promote higher rates of new firm formation. Contrasting results are instead obtained for provisions concerning protection of intellectual property rights.

Keywords

Constitutional rules Entrepreneurship New firm formation Economic effects of constitutions 

JEL Classifications

D72 K10 H10 L26 M13 O50 P48 

Notes

Acknowledgments

We thank Tom Ginsburg for providing us with the data from the Comparative Constitutions Project. We also thank with the usual disclaimers Umberto M. Carbonara, Andreas Engert, Luigi A. Franzoni, Georg Licht, Francesco Parisi, Emanuele Tarantino, Hans-Bernd Schäfer, Stefan Voigt, Wolfgang Weigel and two anonymous referees for useful comments and suggestions. Previous versions of this paper have been presented at the “EMLE-ATM 2015 Workshop” (Erasmus School of Law, Rotterdam, February 14, 2015), the Mannheim Law and Economics Forum (March 26, 2015), the Bucerius Law School Hamburg (June 9, 2015), the 32nd Annual Conference of the European Association of Law and Economics (Vienna, September 17, 2015), and the Business School Research Seminar Series at Hedge Hill University (16 February 2016).

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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • Emanuela Carbonara
    • 1
    • 2
  • Enrico Santarelli
    • 1
    Email author
  • Hien Thu Tran
    • 3
  1. 1.Department of EconomicsUniversity of BolognaBolognaItaly
  2. 2.Johns Hopkins University – SAIS EuropeBolognaItaly
  3. 3.Business SchoolEdge Hill UniversityOrmskirkUK

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