Legal institutions and high-growth aspiration entrepreneurship

Entrepreneurship is crucial for economic growth, yet comparatively little research has examined the relationship between institutions and new firm formation. I test the impact of property rights institutions and contracting institutions on high-growth-aspiration (HGA) entrants using the Global Entrepreneurship Monitor (GEM) survey data for 2000-2005. I find that property rights are more significant for profound market expansion and rule of law is more significant for high job growth. The number of procedures to enforce a contract, the number of procedures to start a business, and the number of days to start a business are negatively correlated with all types of HGA entrepreneurship. A common law legal system is negatively correlated with entrepreneurship combining high job growth and market expansion. These findings add nuance to prior studies that tout the importance of property rights and rule of law for entrepreneurship.

Research highlights► Property rights are more significant for profound market expansion entrepreneurship. ► Rule of law is more significant for high job growth entrepreneurship. ► Increased number of contract enforcement procedures hurts all HGA entrepreneurship. ► Increased number of days to start a firm also retards all HGA entrepreneurship. ► A common-law legal system correlates negatively with Schumpeterian firms.