Regulatory-Disrupting but Infrastructure-Freeing: Entrepreneurial Financing During the Arab Spring (WITHDRAWN)

Abstract

How do revolutions affect entrepreneurial financing? Prior studies argue that revolutions generate political uncertainty that decrease financing and that a more absent state breeds greater informality. However, the Arab Spring saw an increase in state financing actually, and these state institutions, rather than their absence, directly allocated such funding to informal firms. Using a novel dataset collected as the Arab Spring was occurring in Tunisia and Egypt, our study argues that prior work has predominantly focused on how revolutions erode state regulatory power (i.e., the degree to which the state can issue rules without consulting its citizenry). However, we argue that revolutions may also free state infrastructural power (i.e., the degree to which citizenry rely on state institutions for goods and services). More specifically, we find that firms founded during the revolution paid less in bribery payments (“regulatory-disrupting”), and informal firms received more of the state funding made available amidst the Arab Spring (“infrastructure-freeing”). In paying greater attention to state infrastructural power, this study brings greater nuance to how we understand the role of revolutions on entrepreneurial activity. More generally, this study heightens engagement of work in entrepreneurship with insights from political sociology.