Skip to main content
SpringerLink
Log in

Financing, Regulatory Costs and Entrepreneurial Propensity

  • Published:
Small Business Economics Aims and scope Submit manuscript

Abstract

In this paper, we compared the availability of different types of financing sources to address the issue of capital availability to entrepreneurial propensity and we scrutinise the influence of business costs by utilising a new composite index using data from the World Bank’s Doing Business Database. The availability of three types of financing sources was analysed: traditional debt financing, venture capital financing, and informal investments. The study’s findings show that only informal investments have statistically significant influence on entrepreneurial propensity. Regulatory business costs were found to deter opportunity driven entrepreneurship, but had no impact on necessity entrepreneurship.

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

Similar content being viewed by others

References

  • Arauzo-Carod J. M., Segarra-Blasco A., (2005) The Determinants of Entry are Not Independent of Start-Up Size: Some Evidence from Spanish Manufacturing Review Of Industrial Organization 27(2): 147–165

    Article  Google Scholar 

  • Audretsch, David B., Martin A. Carree and Roy Thurik, 2001, ‘Does Entrepreneurship Reduce Unemployment?,’ Discussion paper TI01-074/3, Tinbergen Institute, Erasmus University Rotterdam

  • Autio E., P. K. Wong and P. D. Reynolds, 2003, ‘National Factors Influencing the Prevalence of “High-Potential” Start-Ups.’ NUS Entrepreneurship Centre Research Working Paper

  • Bain J. S., (1956) Barriers to New Competition Harvard University Press Cambridge, MA

    Google Scholar 

  • Bates T., (1995) Self Employment Entry Across Industry Groups Journal of Business Venturing 10(2): 143–157

    Article  Google Scholar 

  • Bamford C. E., Dean T. J., Douglas T. J., (2004) The Temporal Nature of Growth Determinants in New Bank Foundings: Implications for New Venture Research Design Journal of Business Venturing 19(6): 899–919

    Article  Google Scholar 

  • Berger A. N., Udell G. F., (1998) The Economics of Small Business Finance: The Roles of Private Equity and Debt Markets in the Financial Growth Cycle Journal of Banking and Finance 22(6–8): 613–673

    Article  Google Scholar 

  • Bhave M. P., (1994) A Process Model of Entrepreneurial Venture Creation Journal of Business Venturing 9(3): 223–242

    Article  Google Scholar 

  • Birch D., Haggerty A., Parsons W., (1997) Who’s Creating Job? Cognetics Cambridge, MA

    Google Scholar 

  • Bygrave, W. D., M. Hay, E. Ng, and P. Reynolds, 2002, ‘A Study of Investing in 29 Nations Composing the Global Entrepreneurship Monitor.’ Presented at the Babson-Kauffman Entrepreneurship Research Conference, June 2002

  • Bygrave, W. D., and S. Hunt, 2004, Global Entrepreneurship Monitor (GEM) 2004 Financing Report, MA: Babson Colleage and London: London Business School

  • Cassar G., (2004) The Financing of Business Start-ups Journal of Business Venturing 19(2): 261–283

    Article  Google Scholar 

  • Castrogiovanni G. J., (1991) Environmental Munificence: A Theoretical Assessment Academy of Management Review 16(3): 542–565

    Article  Google Scholar 

  • Davidsson, P., 2003, ‘The Domain of Entrepreneurship Research: Some Suggestions’, in Jerome A. Katz and Dean Shepherd (eds.), Cognitive Approaches to Entrepreneurship Research. Advances in Entrepreneurship, Firm Emergence and Growth 6, 315–372

  • De Soto H., (1990) The Other Path Harper and Row New York, NY

    Google Scholar 

  • Dean T. J., Meyer G. D., (1996) Industry Environments and New Venture Formations in U.S Manufacturing a Conceptual and Empirical Analysis of Demand Determinants Journal of Business Venturing, 11(2): 107–132

    Article  Google Scholar 

  • Desai, M., P. Gompers, J. Lerner, 2003, ‘Institutions, Capital Constraints and Entrepreneurial Firm Dynamics: Evidence from Europe’, NBER Working Paper 10165

  • Djankov S., La Porta R., Lopez-de-Silanes F., Shleifer A., (2002) The Regulation of Entry Quarterly Journal of Economics 117(1): 1–37

    Article  Google Scholar 

  • Evans D. S., Leighton L. S., (1989) Some Empirical Aspects of Entrepreneurship American Economic Review 79(3): 519–533

    Google Scholar 

  • Freear J., Sohl J. E., Wetzel W. E., (1995) Angels: Personal Investors in the Venture Capital Market Entrepreneurship and Regional Development 7(1): 85–94

    Google Scholar 

  • Gartner W. B., (1990) What are We Talking about When We Talk About Entrepreneurship? Journal of Business Venturing 5(1): 15–28

    Article  Google Scholar 

  • Gifford S., (1997) Limited Attention and the Role of the Venture Capitalist Journal of Business Venturing 12(6): 459–482

    Article  Google Scholar 

  • Gompers P. A., Lerner J., (2001) The Venture Capital Revolution Journal of Economic Perspectives 15(1): 145–168

    Article  Google Scholar 

  • Gorecki P. K., (1975) The Determinants of Entry by New and Diversifying Enterprises in the U.K. Manufacturing Sector 1958–1963 Some Tentative Results Applied Economics 7(2): 139–147

    Google Scholar 

  • Harrison R. T., Mason C. M., (1992) International Perspectives on the Supply of Informal Venture Capital Journal of Business Venturing 7(6): 459–475

    Article  Google Scholar 

  • Hart S., Denison D. R., (1987) Creating New Technology-based Organizations: A System Dynamics Model Policy Studies Review 6(3):512–528

    Article  Google Scholar 

  • Holtz-Eakin D., Joulfain D., Rosen H. S., (1994) Sticking It Out: Entrepreneurial Survival and Liquidity Constraints Journal of Political Economy 102(1): 53–75

    Article  Google Scholar 

  • Karakaya F., Stahl M. J., (1989) Barriers to Entry and Market Entry Decisions in Consumer and Industrial Goods Markets Journal of Marketing 53(2): 80–91

    Article  Google Scholar 

  • Kauermann G., Tutz G., Bruderl J., (2005) The Survival of Newly Founded Firms: A Case-study into Varying-coefficient Models Journal Of The Royal Statistical Society Series A-Statistics in Society 168(1): 145–158

    Google Scholar 

  • Keuschnigg C., Nielsen S. B., (2004) Taxation and Venture Capital Backed Entrepreneurship International Tax And Public Finance 11(4): 369–390

    Article  Google Scholar 

  • Klapper, L., L. Laeven, and R. Rajan, 2004, ‘Business Environment And Firm Entry: Evidence From International Data,’ NBER Working Paper 10380

  • Koch J. V., (1974) Industrial Organization and Prices Prentice-Hall NJ

    Google Scholar 

  • Lucas R. E., (1978) On the Size Distribution of Business Firms Bell Journal of Economics 9(2): 508–523

    Article  Google Scholar 

  • Mason C. M., Harrison R. T., (2000) The Size of the Informal Venture Capital Market in the United Kingdom Small Business Economics 15(2): 137–148

    Article  Google Scholar 

  • Maula M., Autio E., Arenius P., (2005) What Drives Micro-angel Investments? An Examination of the Determinants of Family and Nonfamily Investments Small Business Economics 25(5): 459–475

    Article  Google Scholar 

  • Meznar M. B., Nigh D., (1995) Buffer or Bridge? Environmental and Organisational Determinants of Public Affair Activities in American Firms Academy of Management Journal 38(4): 975–996

    Article  Google Scholar 

  • OECD, 1998, Technology, Productivity and Job Creation – Best Policy Practices 1998 Edition, Paris: OECD

  • Pfeffer J., Salancik G. R., (1978) The External Control of Organizations: A Resource Dependence Perspective Harper Row New York

    Google Scholar 

  • Porter M. E., (1980) Competitive Advantage Basic Books New York

    Google Scholar 

  • Randolph W. A., Dess G. G., (1984) The Congruence Perspective of Organisation Design: A Conceptual Model and Multivariate Research Approach Academy of Management Review 9(1): 114–127

    Article  Google Scholar 

  • Reynolds, P. D., W. D. Bygrave, E. Autio, L. W. Cox and M. Hay, 2002, Global Entrepreneurship Monitor 2002 Executive Report. Babson College, Ewing Marion Kauffman Foundation and London Business School

  • Reynolds P. D., Bosma N., Autio E., Hunt S., De Bono N., Servais I., Lopez-Garcia P., Chin N., (2005) Global Entrepreneurship Monitor: Data Collection Design and Implementation, 1998–2003 Small Business Economics 24(5): 205–231

    Article  Google Scholar 

  • Schreyer, P., 2000, High Growth Firms and Employment, OECD STI Working Paper 2000/3

  • Shane S., Venkataraman S., (2000) The Promise of Entrepreneurship as a Field of Research Academy of Management Review 25(1): 217–226

    Article  Google Scholar 

  • Specht P. H., (1993) Munificence and Carrying Capacity of the Environment and Organisation Formation Entrepreneurship Theory and Practice 17(2): 77–86

    Google Scholar 

  • Van Auken H. E., (1999) Obstacles to Business Launch Journal of Developmental Entrepreneurship 4(2): 175–187

    Google Scholar 

  • van Gelderen M., Thurik R., Bosma N., (2005) Success and Risk Factors in the Pre-startup Phase Small Business Economics 24(4): 365–380

    Article  Google Scholar 

  • Wetzel W. E., (1983) Angels and Informal Risk Capital Sloan Management Review 24(4):23–34

    Google Scholar 

  • Wong P. K., Ho Y. P., Autio E., (2005a) Entrepreneurship, Innovation, and Economic Growth: Evidence from GEM Data Small Business Economics 24(3): 335–350

    Article  Google Scholar 

  • Wong P. K., Ho Y. P., Autio E., (2005b) Determinants of Angel Investing Propensity: Evidence from the Global Entrepreneurship Monitor Dataset In: Zahra S., et al (eds.) Frontiers of Entrepreneurship Research 2004 Babson College Wellesley MA, p 48–62

    Google Scholar 

  • World Bank, 2004, Doing Business in 2004: Understanding Regulation, Washington: World Bank and Oxford University Press

Download references

Acknowledgment

The authors would like to thank participants at the 2nd GEM Research Conference held in Hungary in April 2005 for helpful comments. We are also grateful to an anonymous referee for useful and detailed comments leading to the present version of the paper.

Author information

Authors and Affiliations

  1. Entrepreneurship Centre, National University of Singapore, Singapore, Singapore

    Yuen-Ping Ho & Poh-Kam Wong

Authors
  1. Yuen-Ping Ho
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Poh-Kam Wong
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Yuen-Ping Ho.

Additional information

Final version accepted on October 2006.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Ho, YP., Wong, PK. Financing, Regulatory Costs and Entrepreneurial Propensity. Small Bus Econ 28, 187–204 (2007). https://doi.org/10.1007/s11187-006-9015-0

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11187-006-9015-0

Keywords

Jel Classifications

Search

Navigation