Social progress, business formation, and access to investment capital

Abstract

The rate of business formation is higher in countries that rank better on dimensions of social progress. This creates a need for investment capital and helps drive a positive relation between social progress and IPO activity. For example, my results suggest that a one standard deviation improvement in a country's Social Progress Index is associated with an additional 0.372 IPOs and a $69.416 increase in cumulative IPO proceeds raised per million people. The relation is stronger for emerging markets than for developed markets. Social progress is also positively correlated with the proportion of IPO firms that receive venture capital funding.