SSE/EFI Working Paper Series in Economics and Finance
No 381:
Determinants of the Prevalence of Start-ups and High-Growth Firms
Per Davidsson ()
and Magnus Henrekson ()
Abstract: The purpose of this study is to identify key institutional
determinants of firm emergence and growth. We do this using various types
of data from Sweden, a country, which until a recent turnaround,
experienced a prolonged period of substandard economic performance. A
characterization of a number of institutions and policy measures shows that
they are likely to have contributed to an environment that discourages
entrepreneurial activity and firm growth. Aspects dealt with include:
missing arenas for entrepreneurship in the care and sectors and for
household-related services, taxation of entrepreneurial income, incentives
for wealth accumulation, wage-setting institutions and labor market
regulations. Using original data, we provide evidence of a low prevalence
of nascent entrepreneurs and a small net employment contribution by
high-growth firms. These micro-level findings are consistent with the
observed weak performance at the macro level. We admit that indisputable
evidence for the effects of institutional arrangements is almost impossible
to establish. However, the consistency of our theoretical arguments and
empirical data makes a strong case for the notion that the Swedish case
illustrates the costs of giving too little weight to economic renewal in
policy making.
Keywords: Business taxation; Entrepreneurship; High-growth firms; Industrial policy; Nascent entrepreneurs; Swedish model; (follow links to similar papers)
JEL-Codes: H30; J21; L52; M13; (follow links to similar papers)
37 pages, May 3, 2000, Revised July 8, 2002
Forthcoming in Small Business Economics, Vol. 16, 2001
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- This paper is published as:
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Davidsson, Per and Magnus Henrekson, (2002), 'Determinants of the Prevalence of Start-ups and High-Growth Firms', Small Business Economics, Vol. 19, September, No. 2, pages 81-104
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