Drivers of Entrepreneurship and Post-Entry Performance of Newborn Firms in Developing Countries

Abstract

The aim of this paper is to provide an updated survey of the "state of the art" in entrepreneurial studies, with a particular focus on developing countries (DCs). In particular, the same concept of "entrepreneurship" will be critically discussed, then moving to the institutional, macroeconomic and microeconomic conditions affecting the entry of new firms and the post-entry performance of newborn firms.

Institutional quality, conforming and evasive entrepreneurship

“…Entrepreneurship may be an escape from unemployment, as it is observed empirically in developed countries (Vivarelli and Audretsch 1998), and although the relationship may be non-linear (Storey 1991). Studies of the effect of unemployment on entrepreneurship in developing countries are seldom, and with mixed evidences (Quatraro and Vivarelli 2014). As data on unemployment are not available at the district level for Indonesia, we can not include this control variable, and we acknowledge that this may be a limit.…”

“…Institutions, either formal or informal, are essential determinants of entrepreneurship (Quatraro and Vivarelli 2014). As a set of rules, norms, values, and cultural meanings, they condition incentives and restrictions that shape the business environment and guide entrepreneurial behavior (North 1990).…”

“…Entrepreneurs need good quality resource-allocative institutions such as access to infrastructures and financial capital, which are often underdeveloped and of uneven quality in developing countries, dampening entrepreneurship (Quatraro and Vivarelli 2014). In such contexts, bribing may enable firms to get better access to public infrastructures and services (Mauro 1995) and to formal finance (e.g., banking credit) (Tonoyan et al 2010).…”

“…As observed in developing countries (Naudé et al 2008), and Asia in particular (Carbonara et al 2019), Education is expected to impact entrepreneurship, although the effect is debated (Quatraro and Vivarelli 2014). We use the average district level of education of household heads (in log).…”