Small Business Economics

, Volume 28, Issue 2–3, pp 187–204 | Cite as

Financing, Regulatory Costs and Entrepreneurial Propensity

  • Yuen-Ping HoEmail author
  • Poh-Kam Wong


In this paper, we compared the availability of different types of financing sources to address the issue of capital availability to entrepreneurial propensity and we scrutinise the influence of business costs by utilising a new composite index using data from the World Bank’s Doing Business Database. The availability of three types of financing sources was analysed: traditional debt financing, venture capital financing, and informal investments. The study’s findings show that only informal investments have statistically significant influence on entrepreneurial propensity. Regulatory business costs were found to deter opportunity driven entrepreneurship, but had no impact on necessity entrepreneurship.


business cost entrepreneurial activity financing informal investment venture capital 

Jel Classifications

G24 L26 M13 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.



The authors would like to thank participants at the 2nd GEM Research Conference held in Hungary in April 2005 for helpful comments. We are also grateful to an anonymous referee for useful and detailed comments leading to the present version of the paper.


  1. Arauzo-Carod J. M., Segarra-Blasco A., (2005) The Determinants of Entry are Not Independent of Start-Up Size: Some Evidence from Spanish Manufacturing Review Of Industrial Organization 27(2): 147–165CrossRefGoogle Scholar
  2. Audretsch, David B., Martin A. Carree and Roy Thurik, 2001, ‘Does Entrepreneurship Reduce Unemployment?,’ Discussion paper TI01-074/3, Tinbergen Institute, Erasmus University RotterdamGoogle Scholar
  3. Autio E., P. K. Wong and P. D. Reynolds, 2003, ‘National Factors Influencing the Prevalence of “High-Potential” Start-Ups.’ NUS Entrepreneurship Centre Research Working PaperGoogle Scholar
  4. Bain J. S., (1956) Barriers to New Competition Harvard University Press Cambridge, MAGoogle Scholar
  5. Bates T., (1995) Self Employment Entry Across Industry Groups Journal of Business Venturing 10(2): 143–157CrossRefGoogle Scholar
  6. Bamford C. E., Dean T. J., Douglas T. J., (2004) The Temporal Nature of Growth Determinants in New Bank Foundings: Implications for New Venture Research Design Journal of Business Venturing 19(6): 899–919CrossRefGoogle Scholar
  7. Berger A. N., Udell G. F., (1998) The Economics of Small Business Finance: The Roles of Private Equity and Debt Markets in the Financial Growth Cycle Journal of Banking and Finance 22(6–8): 613–673CrossRefGoogle Scholar
  8. Bhave M. P., (1994) A Process Model of Entrepreneurial Venture Creation Journal of Business Venturing 9(3): 223–242CrossRefGoogle Scholar
  9. Birch D., Haggerty A., Parsons W., (1997) Who’s Creating Job? Cognetics Cambridge, MAGoogle Scholar
  10. Bygrave, W. D., M. Hay, E. Ng, and P. Reynolds, 2002, ‘A Study of Investing in 29 Nations Composing the Global Entrepreneurship Monitor.’ Presented at the Babson-Kauffman Entrepreneurship Research Conference, June 2002Google Scholar
  11. Bygrave, W. D., and S. Hunt, 2004, Global Entrepreneurship Monitor (GEM) 2004 Financing Report, MA: Babson Colleage and London: London Business SchoolGoogle Scholar
  12. Cassar G., (2004) The Financing of Business Start-ups Journal of Business Venturing 19(2): 261–283CrossRefGoogle Scholar
  13. Castrogiovanni G. J., (1991) Environmental Munificence: A Theoretical Assessment Academy of Management Review 16(3): 542–565CrossRefGoogle Scholar
  14. Davidsson, P., 2003, ‘The Domain of Entrepreneurship Research: Some Suggestions’, in Jerome A. Katz and Dean Shepherd (eds.), Cognitive Approaches to Entrepreneurship Research. Advances in Entrepreneurship, Firm Emergence and Growth 6, 315–372Google Scholar
  15. De Soto H., (1990) The Other Path Harper and Row New York, NYGoogle Scholar
  16. Dean T. J., Meyer G. D., (1996) Industry Environments and New Venture Formations in U.S Manufacturing a Conceptual and Empirical Analysis of Demand Determinants Journal of Business Venturing, 11(2): 107–132CrossRefGoogle Scholar
  17. Desai, M., P. Gompers, J. Lerner, 2003, ‘Institutions, Capital Constraints and Entrepreneurial Firm Dynamics: Evidence from Europe’, NBER Working Paper 10165Google Scholar
  18. Djankov S., La Porta R., Lopez-de-Silanes F., Shleifer A., (2002) The Regulation of Entry Quarterly Journal of Economics 117(1): 1–37CrossRefGoogle Scholar
  19. Evans D. S., Leighton L. S., (1989) Some Empirical Aspects of Entrepreneurship American Economic Review 79(3): 519–533Google Scholar
  20. Freear J., Sohl J. E., Wetzel W. E., (1995) Angels: Personal Investors in the Venture Capital Market Entrepreneurship and Regional Development 7(1): 85–94Google Scholar
  21. Gartner W. B., (1990) What are We Talking about When We Talk About Entrepreneurship? Journal of Business Venturing 5(1): 15–28CrossRefGoogle Scholar
  22. Gifford S., (1997) Limited Attention and the Role of the Venture Capitalist Journal of Business Venturing 12(6): 459–482CrossRefGoogle Scholar
  23. Gompers P. A., Lerner J., (2001) The Venture Capital Revolution Journal of Economic Perspectives 15(1): 145–168CrossRefGoogle Scholar
  24. Gorecki P. K., (1975) The Determinants of Entry by New and Diversifying Enterprises in the U.K. Manufacturing Sector 1958–1963 Some Tentative Results Applied Economics 7(2): 139–147Google Scholar
  25. Harrison R. T., Mason C. M., (1992) International Perspectives on the Supply of Informal Venture Capital Journal of Business Venturing 7(6): 459–475CrossRefGoogle Scholar
  26. Hart S., Denison D. R., (1987) Creating New Technology-based Organizations: A System Dynamics Model Policy Studies Review 6(3):512–528CrossRefGoogle Scholar
  27. Holtz-Eakin D., Joulfain D., Rosen H. S., (1994) Sticking It Out: Entrepreneurial Survival and Liquidity Constraints Journal of Political Economy 102(1): 53–75CrossRefGoogle Scholar
  28. Karakaya F., Stahl M. J., (1989) Barriers to Entry and Market Entry Decisions in Consumer and Industrial Goods Markets Journal of Marketing 53(2): 80–91CrossRefGoogle Scholar
  29. Kauermann G., Tutz G., Bruderl J., (2005) The Survival of Newly Founded Firms: A Case-study into Varying-coefficient Models Journal Of The Royal Statistical Society Series A-Statistics in Society 168(1): 145–158Google Scholar
  30. Keuschnigg C., Nielsen S. B., (2004) Taxation and Venture Capital Backed Entrepreneurship International Tax And Public Finance 11(4): 369–390CrossRefGoogle Scholar
  31. Klapper, L., L. Laeven, and R. Rajan, 2004, ‘Business Environment And Firm Entry: Evidence From International Data,’ NBER Working Paper 10380Google Scholar
  32. Koch J. V., (1974) Industrial Organization and Prices Prentice-Hall NJGoogle Scholar
  33. Lucas R. E., (1978) On the Size Distribution of Business Firms Bell Journal of Economics 9(2): 508–523CrossRefGoogle Scholar
  34. Mason C. M., Harrison R. T., (2000) The Size of the Informal Venture Capital Market in the United Kingdom Small Business Economics 15(2): 137–148CrossRefGoogle Scholar
  35. Maula M., Autio E., Arenius P., (2005) What Drives Micro-angel Investments? An Examination of the Determinants of Family and Nonfamily Investments Small Business Economics 25(5): 459–475CrossRefGoogle Scholar
  36. Meznar M. B., Nigh D., (1995) Buffer or Bridge? Environmental and Organisational Determinants of Public Affair Activities in American Firms Academy of Management Journal 38(4): 975–996CrossRefGoogle Scholar
  37. OECD, 1998, Technology, Productivity and Job Creation – Best Policy Practices 1998 Edition, Paris: OECDGoogle Scholar
  38. Pfeffer J., Salancik G. R., (1978) The External Control of Organizations: A Resource Dependence Perspective Harper Row New YorkGoogle Scholar
  39. Porter M. E., (1980) Competitive Advantage Basic Books New YorkGoogle Scholar
  40. Randolph W. A., Dess G. G., (1984) The Congruence Perspective of Organisation Design: A Conceptual Model and Multivariate Research Approach Academy of Management Review 9(1): 114–127CrossRefGoogle Scholar
  41. Reynolds, P. D., W. D. Bygrave, E. Autio, L. W. Cox and M. Hay, 2002, Global Entrepreneurship Monitor 2002 Executive Report. Babson College, Ewing Marion Kauffman Foundation and London Business SchoolGoogle Scholar
  42. Reynolds P. D., Bosma N., Autio E., Hunt S., De Bono N., Servais I., Lopez-Garcia P., Chin N., (2005) Global Entrepreneurship Monitor: Data Collection Design and Implementation, 1998–2003 Small Business Economics 24(5): 205–231CrossRefGoogle Scholar
  43. Schreyer, P., 2000, High Growth Firms and Employment, OECD STI Working Paper 2000/3Google Scholar
  44. Shane S., Venkataraman S., (2000) The Promise of Entrepreneurship as a Field of Research Academy of Management Review 25(1): 217–226CrossRefGoogle Scholar
  45. Specht P. H., (1993) Munificence and Carrying Capacity of the Environment and Organisation Formation Entrepreneurship Theory and Practice 17(2): 77–86Google Scholar
  46. Van Auken H. E., (1999) Obstacles to Business Launch Journal of Developmental Entrepreneurship 4(2): 175–187Google Scholar
  47. van Gelderen M., Thurik R., Bosma N., (2005) Success and Risk Factors in the Pre-startup Phase Small Business Economics 24(4): 365–380CrossRefGoogle Scholar
  48. Wetzel W. E., (1983) Angels and Informal Risk Capital Sloan Management Review 24(4):23–34Google Scholar
  49. Wong P. K., Ho Y. P., Autio E., (2005a) Entrepreneurship, Innovation, and Economic Growth: Evidence from GEM Data Small Business Economics 24(3): 335–350CrossRefGoogle Scholar
  50. Wong P. K., Ho Y. P., Autio E., (2005b) Determinants of Angel Investing Propensity: Evidence from the Global Entrepreneurship Monitor Dataset In: Zahra S., et al (eds.) Frontiers of Entrepreneurship Research 2004 Babson College Wellesley MA, p 48–62Google Scholar
  51. World Bank, 2004, Doing Business in 2004: Understanding Regulation, Washington: World Bank and Oxford University PressGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  1. 1.Entrepreneurship CentreNational University of SingaporeSingaporeSingapore

Personalised recommendations