Filtering or facilitating productive entrepreneurship?

Abstract

There is a paucity of knowledge on the conditions which enable productive entrepreneurship, particularly those which are policy-amenable like regulations. Rooted in opposing theories of public choice and public interest, we investigate the effect of several types of business regulation on productive entrepreneurship, accounting also for importance of corruption. First, we propose a composite measure of productive entrepreneurship based on three criteria: ability to capture current and potential economic gains, reflective of activities and output, and innovation-centric. Second, using a multi-source panel dataset comprising 1065 country-year observations for 118 countries during 2005–2016, we hypothesize and empirically test for the effect of three types of regulation relevant to business stages - Birth, Growth, and Exit (BSR, GSR, EXSR) - on our measure of productive entrepreneurship. Our findings advance growing insights on the highly heterogenous nature of regulation by type and even by tool (e.g. financial, procedural), and limited recent insights on drivers of productive entrepreneurship. We offer implications for research and for policy design.