New Firm Creation: A Global Assessment of National, Contextual and Individual Factors
By Paul D. Reynolds, Howard Hoffman Distinguished Scholar of Management and Entrepreneurship, George Washington University, USA, pauldavidsonreynolds@gmail.com
Abstract
The prevalence of individuals actively involved in business creation among 75 countries varies from one in thirty (Japan, Belgium, France) to one in three (Peru, Uganda). Predictive models reflecting five national aspects — economic, structural, centralized control, population potential for entrepreneurship, and cultural support — are able to account for 63% to 93% of the variation in 23 types of business creation. The most important factors associated with the prevalence of business creation are the capacity of the population to participate in business start-ups, a high prevalence of small businesses, participation of women in the labor force, the presence of informal investors, emphasis on traditional rather than secular–rational values, presence of young adults, and income inequality. The use of log linear regression modeling to predict individual participation in 15 types of business creation explained from 14% to 41% of the variance. Personal attributes, national cultural and social norms, and personal context were much more likely to be associated with individual participation in business creation than characteristics of the national economy, economic structure, population readiness for business creation or centralized control of economic activity. The primary policy implication is that efforts to directly prepare individuals for business creation are more likely to have an impact compared to adjustments in regulatory procedures or legal standards. The assessment demonstrates the considerable value from harmonized cross national data on business creation and national attributes. There remains, however, substantial opportunity for improving understanding of the entrepreneurial process.
New Firm Creation
New firm creation is one of the most important facets of modern economic life. Firm creation is central to national economic development and new firms are a primary feature of the mechanisms underlying structural changes as economies adapt and grow, reflecting the emergence of new industries producing new products with new production technologies. Only in the last several decades has it been possible to develop precise assessments of the scope and impact of business creation. New Firm Creation: A Global Assessment of National, Contextual and Individual Factors employs procedures, which have been developed and implemented in over 75 countries, for identifying representative samples of those active in business creation, to explore business creation from a global perspective. New Firm Creation asks the question – what national characteristics are associated with differences in business creation? Following a discussion of 23 different measures of business creation, the author reviews the five major domains that may influence business creation, represented by 25 different measures. Linear additive models are developed that predict variation in business creation showing strong evidence of associations between national characteristics and business creation. Countries in ten world regions are characterized in terms of the features most highly associated with business creation. Finally, implications for policy interventions and future research conclude the discussion.
