Wealthy families, as opposed to small public shareholders, characterize ownership of the large corporate sectors of many countries around the world. This paper shows that greater oligarchic family control over large corporations is associated with worse social economic outcomes. It also correlates with more bureaucratic and more interventionist governments, and less developed financial markets. Further tests show that red tape, price controls, and the lack of shareholder rights protection are the paramount factors relating to the extent of family control of large firms. These results are broadly consistent with Olson and others who argue that economically entrenched wealthy insiders pursue rent-seeking activities to preserve the status quo, and that this increases corruption, and impedes growth. Journal of International Business Studies (2006) 37, 603–622. doi:10.1057/palgrave.jibs.8400213

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This article focuses on institutional obstacles to entrepreneurship. Entrepreneurs carry out a highly complicated composite act. They need intelligence to collect and digest information about business opportunities. They need foresight about the possibilities new technologies and other developments create. They need judgement and leadership skills to found a company and guide its growth. They need communication skills to enthuse financiers to back their vision. The number of active entrepreneurs therefore depends on how many individuals possess these skills. But skills are not endowments. Individuals decide to develop those skills that advance their well being and to forgo developing those that do not. The prospects of a career as an entrepreneur depend on the economic environment, which can be facilitative or detrimental. A multitude of factors determine this environment: rules and regulations, the quality of government, the availability of education, and the ambient culture.