How do bankruptcy laws affect entrepreneurship development around the world?

How do bankruptcy laws as formal institutions affect entrepreneurship development around the world? Do entrepreneur-friendly bankruptcy laws encourage more entrepreneurship development at a societal level? We posit that if bankrupt entrepreneurs are excessively punished for failure, they may give up...

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Bibliographic Details
Published inJournal of business venturing Vol. 26; no. 5; pp. 505 - 520
Main Authors Lee, Seung-Hyun, Yamakawa, Yasuhiro, Peng, Mike W., Barney, Jay B.
Format Journal Article
LanguageEnglish
Published New York Elsevier Inc 01.09.2011
Elsevier
Elsevier Sequoia S.A
SeriesJournal of Business Venturing
Subjects
Bankruptcy laws
Bankruptcy laws Entrepreneurship Institutions Institution-based view
Entrepreneurship
Institution-based view
Institutions
International
Startups
Studies
Bankruptcy laws
Institution-based view
Institutions
Entrepreneurship
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Summary:How do bankruptcy laws as formal institutions affect entrepreneurship development around the world? Do entrepreneur-friendly bankruptcy laws encourage more entrepreneurship development at a societal level? We posit that if bankrupt entrepreneurs are excessively punished for failure, they may give up potentially high-return but inherently high-risk opportunities to start new businesses. Amassing a cross-country database from 29 countries spanning 19 years (1990–2008), we find that lenient, entrepreneur-friendly bankruptcy laws are significantly correlated with the level of entrepreneurship development as measured by the rate of new firm entry.
ISSN:0883-9026
1873-2003
DOI:10.1016/j.jbusvent.2010.05.001