Finance and entrepreneurial entry

This paper investigates the determinants of both the volume of finance and the sources of finance of business start-ups in 42 countries. Using the Global Entrepreneurship Monitor (GEM) surveys for 1998-2003, we jointly examine how the institutional business environment and individual characteristics of entrepreneurs affect the financing of entrepreneurs. We find that the property rights system is the most significant determinant of both the total volume of finance and of the use of external finance for the individual start-up project. In addition, our findings suggest that that the supply of informal finance is associated with the higher share of external sources in start-up finance, whereas the size of the formal financial sector appears to play a more important role for the volume of entrepreneurial self-finance. Our results suggest that the use of external finance by start-ups correlates with the extent of financial restrictions in a country in a non-monotonic way. We find that some financial restrictions may enhance the use of external funds by entrepreneurs, yet the sign of this effect reverses and the coefficient becomes stronger for the high level of financial repression by the government. Finally, our findings imply that the characteristics of the start-up finance are also affected by various individual characteristics of entrepreneurs, their growth intentions and ownership structure.

An examination of the determinants of entrepreneurship at the regional level:the case of East Midlands region

Despite the importance of new firms to the economy, determinants of start-ups have mainly been examined at a country level and discussion of regional entrepreneurial activity has received less attention. Since there are significant variations in entrepreneurship rates across and within countries, such an investigation at a regional level would help in gaining an in depth understanding of the impact of the individual level resource endowments and neighbourhood characteristics on an individual’s decision to engage in entrepreneurial activity. The main aim of the thesis is to explore various theories of entrepreneurship and develop integrated frameworks for examining the determinants of entrepreneurial activity at a neighbourhood level in the East Midlands region in England. The specific objectives of the thesis are to examine how the individual level resources and the neighbourhood characteristics: (i) combine to influence an individual to engage in the different stages of the entrepreneurial process, (ii) influence natives and migrants to engage in start up activity and (iii) influence women and men to become self-employed and ambitious entrepreneurs. In terms of the methodology, the empirical analysis is based on two databases combined: 2006 to 2009 GEM East Midlands region and the English Index of Multiple Deprivation dataset. Based on the critical review of the literature on entrepreneurship the thesis develop theoretical frameworks which led to formulate hypotheses related to the differentiated impact of both individual and neighbourhood level factors on the propensity of an individual to be involved in entrepreneurial activity. The findings indicate that the determinants of entrepreneurial activity vary with human, financial and the local environment factors affecting the entrepreneurial process. Finally, the thesis calls for caution when developing and applying generic and specific policy measures aimed at promoting entry into entrepreneurship.

Investment liberalisation, technology take-off and export markets entry:does foreign ownership structure matter?

Before and after its accession to the WTO in 2001, China has undergone a far-reaching investment liberalisation. As part of this, existing restrictions on foreign ownership structure and mandatory export and technology transfer requirements imposed on foreign firms have been lifted in a number of industries. Against this background we identify the causal effects of foreign acquisitions on export market entry and technology take-off and evaluate whether the level of foreign ownership plays a role in stimulating these changes. Using doubly robust propensity score reweighted bivariate probit regressions to control for the selection bias associated with firm level foreign acquisition incidences, we uncover strong but heterogeneous positive effects on export activity for all types of foreign ownership structure. We also find that minority foreign owned acquisition targets experience higher likelihood of R&D, providing evidence that joint ventures can contribute positively to China's "science and technology take-off".

Shadow economy and entrepreneurial entry

The impact of the shadow economy on entrepreneurial entry across countries is analyzed utilising 1998-2005 individual-level Global Entrepreneurship Monitor data and national macro-economic variables. A simple correlation coefficient suggests a positive relationship between the size of the shadow economy and the likelihood of entrepreneurial entry. However, this masks more complex relationships, if, as argued, the shadow economy is an embedded social phenomenon. With appropriate controls and instrumenting for potential endogeneity, the impact of the shadow economy on entry in a linear specification is found to be negative. Further, there is evidence of a U-shaped relationship: entrepreneurial entry is least likely when the shadow economy amounts to about a quarter of gross domestic product (GDP). At the individual level, an extensive shadow economy has a more negative impact on respondents who are risk averse. In addition, in the economies where property rights are stronger, the negative impact of the shadow economy is weaker. © 2012 Blackwell Publishing Ltd.