Factors affecting venture creation time in emerging economies

Abstract

Entrepreneurship is considered to be a contributor in the growth engine of an economy. As per the “old” neo-classical growth theory, labour and capital are the sole elements driving the growth. However, in “new” endogenous growth theory, education, entrepreneurship and innovation are also considered as key inputs (Wennekers & Thurik, 1999). Entrepreneurial activities exhibit variation across countries due to different entry regulations of new firms (Djankov, Porta, Lopez-De-Silanew, et al., 2002). For example, in Argentina, 2010, an entrepreneur spent 25 days to start a new venture completing 14 procedures. In Turkey, 2010, an entrepreneur spent 7 days to start a new venture completing 7 procedures (World Bank Indicators, 2016). The variation can further be realized across different time periods and different types of economies (emerging, developed and underdeveloped). Yet there has been limited literature to analyse the relationship between the venture creation time which highlights the entry barriers in a country vis-à-vis macro institutional and non-institutional factors. Previous studies primarily focused on financial criteria to create new venture. The focus of the study is to analyse the effect of macro institutional and non-institutional factors for creating a new venture. Subsequently, understand if the factors facilitate entrepreneurship or create entry barriers. Creating a new venture requires significant commitment and perseverance from the entrepreneurs (Busenitz & Lau, 1996; Gatewood, Shaver, & Gartner, 1995). On top of this, unfriendly policies, entry barriers further aggravate the situation extending the time required to create a new venture. It might restrict some of the entrepreneurs from creating a venture or force them to operate in unregistered sector. Reducing the entry barriers can encourage more entrepreneur to create new ventures, leading to economic growth and a better living standard (Djankov, et al., 2002). The project attempts to analyse the factors impacting the venture creation time of new business in emerging economies. The data was collected for the 12 year period from 2005 to 2016. This was done for 32 emerging markets, leading to 384 data points, each consisting of 18 variables in total (one response variable, one country variable, one year variable, 13 independent variables and two control variables). The findings of the project can inform policy makers about how macro institutional and non-institutional factors can impact the venture creation time. It can help policy makers take favorable decisions to expedite the creation of new ventures leading to economic growth.