Genetic distance and the difference in new firm entry between countries

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Abstract

Does genetic distance between countries explain differences in the level of entrepreneurship between them? Genetic distance, or very long-term divergence in intergenerationally transmitted traits across populations, has been recently tied to a variety of outcomes ranging from differences in economic development to differences in risk preferences between countries. Extending this recent work, we ask whether the genetic distance between countries is associated with differences in new firm entry. Based on a sample of 103 countries and 5253 country-pair observations and controlling for a large variety of factors, we find that genetic distance is positively associated with between country differences in new firm entry. The effects sizes, as expected, are small. In assessing the differences in entrepreneurial activity between country-pairs, policymakers could consider adjusting for genetic distance as an explanation for differences in entrepreneurial activity.

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Notes

  1. 1.

    The data are available at: http://www.doingbusiness.org/data/exploretopics/entrepreneurship

  2. 2.

    We focus on the US for two reasons. First, it is considered the “world technological frontier” (Spolaore and Wacziarg 2009) and second, all previous genetic distance studies used genetic distance relative to the US.

  3. 3.

    In the cases where we did not have data for all of the years, we used the average of the available years.

  4. 4.

    The data are available at: http://www.census.gov/ces/dataproducts/bds/data_firm.html

  5. 5.

    The data are available at: http://research.stlouisfed.org/fred2/series/USAWFPNA#.

  6. 6.

    The data are available at: http://sites.tufts.edu/enricospolaore/.

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Funding

This study was funded by from Advance Research Center (supported through UID/SOC/04521/2019 project by FCT - Fundação para a Ciência e a Tecnologia, Portugal).

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Correspondence to Maria João Guedes.

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Appendix

Appendix

Table 4 Descriptive statistics (all the variables are for each country-pair)
Table 5 Pairwise correlations
Table 6 Two-way clustered standard errors bilateral regressions – casewise deletion for each model (same specification as in Table 2)
Table 7 Two-way clustered standard errors bilateral regressions – casewise deletion for each model (same specification as in Table 2, now including Cultural dimensions)
Table 8 Two-way clustered standard errors bilateral regressions – casewise deletion for each model using World Value Survey (WVS) Cultural distance measure
Table 9 List of countries in the sample

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Guedes, M.J., Nicolaou, N. & Patel, P.C. Genetic distance and the difference in new firm entry between countries. J Evol Econ 29, 973–1016 (2019). https://doi.org/10.1007/s00191-019-00613-2

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Keywords

  • Genetic distance
  • Entrepreneurship
  • Comparative entrepreneurship
  • Country or areas study
  • New firm entry

JEL classification

  • L26
  • M13