Regulation and entrepreneurial intention: cross-country evidence

Date21 August 2017
Published date21 August 2017
Pages193-205
DOIhttps://doi.org/10.1108/JEPP-02-2017-0004
AuthorSriparna Ghosh
Subject MatterStrategy,Entrepreneurship,Business climate/policy
Regulation and entrepreneurial
intention: cross-country evidence
Sriparna Ghosh
Department of Economics, West Virginia University,
Morgantown, West Virginia, USA
Abstract
Purpose Entrepreneurship, along with its effect on economic growth, has been a major topic of research for
quite some time now. However, none of these studies employs the use of entrepreneurial intention, a key
indicator of latent entrepreneurs, as a measure of entrepreneurship. Till now, some small-scale studies have
been done using survey data, with results indicating that external entrepreneurial environment affects
entrepreneurial intention. A handful of studies have also looked at the linkages between economic freedom
and entrepreneurial activities. The paper aims to discuss this issue.
Design/methodology/approach Using a panel data setting, this paper investigates the effects
of economic freedom, especially regulation, on entrepreneurial intention. The empirical analysis uses data for
79 countries from 2001 to 2012.
Findings The findings suggest that stricter credit market regulation reduces entrepreneurial intention
whereas more stringent labor regulations restricts job availability and thereby encourage more people to take
up entrepreneurship as a career choice.
Research limitations/implications The entrepreneurial intention data available from GEM is a highly
unbalanced data and the data also does not differentiate between latent entrepreneurship in agricultural and
non-agricultural sectors.
Practical implications Future research should focus more on latent entrepreneurship which is a rough
estimate of future entrepreneurs.
Social implications Entrepreneurship acts as a channel to improve economic growth by creating more
jobs and the institutional qualities might act as a barrier for aspiring entrepreneurs to take up
entrepreneurship as their career choices in developing countries.
Originality/value This studyhas a twofold contributionin the literature. First, it isthe foremost large scale
study that deals with entrepreneurial intention using secondary data from Global Economic Monitor (GEM)
report.Second, this study explores the linkagesbetween economic freedom indexand entrepreneurial intention.
Keywords Freedom, Entrepreneurial action, Regulatory policy
Paper type Research paper
1. Introduction
Entrepreneurship is one of the driving forces of economic growth in a country
(Reynolds et al., 1999; Berkowitz and David, 2005; Kreft and Sobel, 2005). The differences
in entrepreneurship rates accounts for almost 50 percent of the difference in economic
growth of a country (Zacharakis et al., 2000). On the other hand, economic freedom is a
major determinant of economic growth across countries (Gwartney et al., 1999). Linking
these concepts, Ovaska and Sobel (2005) and Kreft and Sobel (2005) deduced that
economic freedom fosters economic growth via entrepreneurial activity. According to the
Business and Industry Advisory Committee to the Organization for Economic
Cooperation and Development (OECD), Policies to foster entrepreneurship are essential
to job creation and economic growth[1].
Only a handful of studies have looked at the linkage between economic freedom and
entrepreneurship (Nyström, 2008; Bjørnskov and Foss, 2008; Angulo-Guerrero et al., 2017;
Carlos Díaz-Casero et al., 2012). Bjørnskov and Foss (2008) made a concerted effort to explain
cross-country differences in entrepreneurship with the help of changes in economic policies Journal of Entrepreneurship and
Public Policy
Vol. 6 No. 2, 2017
pp. 193-205
© Emerald PublishingLimited
2045-2101
DOI 10.1108/JEPP-02-2017-0004
Received 5 February 2017
Revised 4 May 2017
Accepted 4 May 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
JEL Classification M13, O15
The author would like to thanks Dr Joshua Hall and the participants of 2016 Public Choice Society
meeting for helpful comments and suggestions.
193
Regulation and
entrepreneurial
intention

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