Skip to main content
SpringerLink
Log in

Regulation, firm dynamics and entrepreneurship

  • Published:
European Journal of Law and Economics Aims and scope Submit manuscript

Abstract

Entrepreneurship can have important positive effects linked to job creation, wealth and income generation, innovation and industry competitiveness. Scholars and policy-makers around the world have turned to the regulatory environment as a mechanism through which entrepreneurship can be encouraged, grown and its economic benefits harnessed. The effect of regulatory conditions on entrepreneurship however is not well understood, and can be nuanced given the wide range of regulatory tools and possible areas of impact. This paper serves as the introduction to a special issue, which seeks to shed some light on the relationship between regulation, firm dynamics and entrepreneurship. We identify some foundational considerations relevant to this relationship and discuss key questions, followed by a brief overview of each of the papers contained in the special issue.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Notes

  1. See Hägg (1997) for a review of economic theories of regulation.

  2. Gordon (2004) and Bosma and Levie (2010) claim that institutional differences explains the growth differences between Europe and the US.

  3. See Gentry and Hubbard (2000) and Hansson (2008) for the effects of different types of taxes on entry.

  4. As a measure of quality of regulations, we use the overall doing business index. After merging the three data sources we have 43 and 37 observations respectively for new business entry rate and firm dynamics. Norway and Hong Kong were excluded on the basis that observations were four standard deviations from the mean, but keeping them in the data however does not change the results significantly.

References

  • Acemoglu, D., Aghion, P., & Zilibotti, F. (2003). Vertical integration and distance to frontier. Journal of the European Economic Association, 1(2–3), 630–638.

    Article  Google Scholar 

  • Acemoglu, D., Aghion, P., & Zilibotti, F. (2006). Distance to frontier, selection, and economic growth. Journal of the European Economic Association, 4(1), 37–74.

    Article  Google Scholar 

  • Acs, Z. J., Desai, S., & Hessels, J. (2008). Entrepreneurship, economic development and institutions. Small Business Economics, 31(3), 219–234.

    Article  Google Scholar 

  • Aghion, P., Burgess, R., Redding, S., & Zilibotti, F. (2006). The unequal effects of liberalization: Evidence from dismantling the License Raj in India. Cambridge: National Bureau of Economic Research.

    Book  Google Scholar 

  • Ardagna, S., & Lusardi, A. (2008). Explaining international differences in entrepreneurship: The role of individual characteristics and regulatory constraints. In J. Lerner & A. Schoar (Eds.), International differences in entrepreneurship. Chicago: University Chicago Press.

    Google Scholar 

  • Ardagna, S., & Lusardi, A. (2009). Heterogeneity in the effect of regulation on entrepreneurship and entry size. NBER WP 15510, NBER, Cambridge, MA.

  • Audretsch, D. B., & Walshok, M. (2013). Creating competitiveness: Entrepreneurship and innovation policies for growth. Cheltenham: Edward Elgar Publishing.

    Google Scholar 

  • Autorm, D. H., Kerr, W. R., & Kugler, A. D. (2007). Does employment protection reduce productivity? Evidence from US states. Economic Journal, 117(521), 189–217.

    Article  Google Scholar 

  • Banerjee, A. V., & Newman, A. F. (1993). Occupational choice and the process of development. Journal of Political Economy, 101(2), 274–298.

    Article  Google Scholar 

  • Bassanini, A., & Venn, D. (2007). Assessing the impact of labour market policies on productivity: A difference-in-differences approach. Paris: OECD Publishing.

    Book  Google Scholar 

  • Becker, G. S. (1983). A theory of competition among pressure groups for political influence. The Quarterly Journal of Economics, 98(3), 371–400.

    Article  Google Scholar 

  • Bosma, N., & Levie, J. (2010). Global entrepreneurship monitor: GEM 2009 results.

  • Braunerhjelm, P., & Eklund, J. E. (2014). Taxes, tax administrative burdens and new firm formation. Kyklos, 67(1), 1–11.

    Article  Google Scholar 

  • Chun, H., Kim, J. W., Morck, R. & Yeung, B. (2007). Creative destruction and firm-specific performance heterogeneity. NBER Working Paper 13011, Cambridge, MA.

  • Ciccone, A., & Papaioannou, E. (2006). Red tape and delayed entry. CEPR DP 5996, CEPR, London.

  • Cullen, J. B., & Gordon, R. H. (2007). Taxes and entrepreneurial risk-taking: Theory and evidence for the US. Journal of Public Economics, 91(7), 1479–1505.

    Article  Google Scholar 

  • Davidsson, P., & Honig, B. (2003). The role of social and human capital among nascent entrepreneurs. Journal of Business Venturing, 18(3), 301–331.

    Article  Google Scholar 

  • Desai, S., & Eklund, J. E. (2014). Ownership and the allocation of capital: Evidence from 44 countries. Journal of Institutional and Theoretical Economics, 170(3), 427–452.

    Google Scholar 

  • Djankov, S. (2008). The regulation of entry: A survey. CEPR Discussion Papers 7080.

  • Djankov, S., La Porta, R., Lopez-De-Silanes, F., & Shleifer, A. (2002). The regulation of entry. The Quarterly Journal of Economics, 117(1), 1–37.

    Article  Google Scholar 

  • Dunn, T., & Holtz-Eakin, D. (2000). Financial capital, human capital, and the transition to self-employment: Evidence from intergenerational links. Cambridge: National Bureau of Economic Research.

    Google Scholar 

  • Estrin, S., Korosteleva, J., & Mickiewicz, T. (2013). Which institutions encourage entrepreneurial growth aspirations? Journal of Business Venturing, 28(4), 564–580.

    Article  Google Scholar 

  • Evans, D. S., & Jovanovic, B. (1989). An estimated model of entrepreneurial choice under liquidity constraints. The Journal of Political Economy, 97(4), 808–827.

    Article  Google Scholar 

  • Fonseca, R., Lopez-Garcia, P., & Pissarides, C. A. (2001). Entrepreneurship, start-up costs and employment. European Economic Review, 45(4), 692–705.

    Article  Google Scholar 

  • Fonseca, R., Michaud, P., & Sopraseuth, T. (2007). Entrepreneurship, wealth, liquidity constraints, and start-up costs. Comparative Labor Law and Policy Journal, 28, 637–674.

    Google Scholar 

  • Gentry, W. M., & Hubbard, R. G. (2000). Tax policy and entrepreneurial entry. American Economic Review, 90(2), 283–287.

    Article  Google Scholar 

  • Giannetti, M., & Simonov, A. (2004). On the determinants of entrepreneurial activity: Social norms, economic environment and individual characteristics. Swedish Economic Policy Review, 11(2), 269–313.

    Google Scholar 

  • Glaeser, E. L., & Kerr, W. R. (2009). Local industrial conditions and entrepreneurship: How much of the spatial distribution can we explain? Journal of Economics & Management Strategy, 18(3), 623–663.

    Article  Google Scholar 

  • Glaeser, E. L., Resseger, M., & Tobio, K. (2009). Inequality in Cities Journal of Regional Science, 49(4), 617–646.

    Article  Google Scholar 

  • Gordon, R. H. (1998). Can high personal tax rates encourage entrepreneurial activity? Staff Papers-International Monetary Fund, 45(1), 49–80.

    Article  Google Scholar 

  • Gordon, N. (2004). Do federal grants boost school spending? Evidence from Title I. Journal of Public Economics, 88(9), 1771–1792.

    Article  Google Scholar 

  • Gross, D. M., & Ryan, M. (2008). FDI location and size: Does employment protection legislation matter? Regional Science and urban economics, 38(6), 590–605.

    Article  Google Scholar 

  • Hägg, P. G. (1997). Theories on the economics of regulation: A survey of the literature from a European perspective. European Journal of Law and Economics, 4(4), 337–370.

    Article  Google Scholar 

  • Hansson, A. (2008). Income taxes and the probability to become self-employed: The case of Sweden. Ratio Working Papers No. 122.

  • Javorcik, B., Arnold, J., & Mattoo, A. (2006). The productivity effects of services liberalization: Evidence from the Czech Republic. World Bank Policy Research Working Paper.

  • Klapper, L., Laeven, L., & Rajan, R. (2006). Entry regulation as a barrier to entrepreneurship. Journal of Financial Economics, 82(3), 591–629.

    Article  Google Scholar 

  • Kugler, A., & Pica, G. (2008). Effects of employment protection on worker and job flows: Evidence from the 1990 Italian reform. Labour Economics, 15(1), 78–95.

    Article  Google Scholar 

  • Martins, A. P. (2009). Union duopoly with heterogeneous labor: The effect of minimum wage regulation. International Journal of Social Economics, 36(5), 580–607.

    Article  Google Scholar 

  • Nicoletti, G., & Scarpetta, S. (2003). Regulation, productivity and growth: OECD evidence. Economic policy, 18(36), 9–72.

    Article  Google Scholar 

  • Pages, C., & Micco, A. (2006). The economic effects of employment protection laws. Paper presented at the IZA/the World Bank conference on employment and development.

  • Peltzman, S. (1976). Toward a more general theory of regulation. Cambridge, Mass.: National Bureau of Economic Research.

    Book  Google Scholar 

  • Pigou, A. C. (1938). The economics of welfare. London: MacMillian and Co.

    Google Scholar 

  • Stenholm, P., Acs, Z. J., & Wuebker, R. (2013). Exploring country-level institutional arrangements on the rate and type of entrepreneurial activity. Journal of Business Venturing, 28(1), 176–193.

    Article  Google Scholar 

  • Stigler, G. J. (1971). The theory of economic regulation. The Bell Journal of Economics and Management Science, 2(1), 3–21.

    Article  Google Scholar 

Download references

Acknowledgments

Valuable research support is acknowledged from the Marianne and Marcus Wallenberg Foundation and Vinnova.

Conflict of interest

None.

Author information

Authors and Affiliations

  1. Swedish Entrepreneurship Forum and Royal Institute of Technology, Grevgatan 34, 3rd Floor, 11453, Stockholm, Sweden

    Pontus Braunerhjelm

  2. Indiana University, 1315 E. 10th Street, Bloomington, IN, 47405, USA

    Sameeksha Desai

  3. Swedish Entrepreneurship Forum and Jönköping International Business School, Grevgatan 34, 3rd Floor, 11453, Stockholm, Sweden

    Johan E. Eklund

Authors
  1. Pontus Braunerhjelm
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Sameeksha Desai
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Johan E. Eklund
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Johan E. Eklund.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Braunerhjelm, P., Desai, S. & Eklund, J.E. Regulation, firm dynamics and entrepreneurship. Eur J Law Econ 40, 1–11 (2015). https://doi.org/10.1007/s10657-015-9498-8

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10657-015-9498-8

Keywords

JEL Classification

Search

Navigation