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Entrepreneurial firms’ choice of ownership forms

  • Yoon-Suk Baik
  • Seung-Hyun LeeEmail author
  • Choonwoo Lee
Article

Abstract

Being a sole proprietor has few legal requirements, but is inferior to incorporation in terms of obtaining the necessary resources required for firm growth. However, sole proprietorship is the predominant choice for entrepreneurial firms because it allows for quick decision-making and low monitoring cost among investors. We use the World Bank Enterprise Survey and find that sole proprietorship is the most dominant ownership form choice for entrepreneurial firms in emerging economies. This tendency decreases if entrepreneurs have extensive industry experience, threats from competitors in the informal sector are low, or the workforce is sufficiently educated for the labor market. We discuss implications on entrepreneurship in emerging markets.

Keywords

Ownership forms Sole proprietorship Incorporation Entrepreneurial firms 

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Graduate School of ManagementKorea Advanced Institute of Science and TechnologySeoulKorea
  2. 2.Jindal School of ManagementUniversity of Texas at DallasRichardsonUSA
  3. 3.College of Business AdministrationUniversity of SeoulSeoulKorea

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