Essays in international entrepreneurship: The effects of institutions on entrepreneurial activity.

Abstract

My dissertation consists of three essays examining the effects of institutions on entrepreneurial activity. In the first essay, I test for the relative importance of various social ties (<italic>guanxi</italic>) as a catalyst for entrepreneurship in urban China using survey data from five cities for the period 1996-2001. I find that <italic>guanxi</italic> with the Chinese Communist Party (CCP) is negatively correlated with the likelihood of being either a sole proprietor or an entrepreneur with employees. Family <italic>guanxi</italic> has no effect for sole proprietors, but is positively correlated with the probability of being an entrepreneur with employees. Although entrepreneurship is a key for economic growth, comparatively little research has examined the relationship between institutions and new firm formation. In my second essay, I test the impact of trust and rule of law on new firm formation using the Global Entrepreneurship Monitor (GEM) survey data for 2001-2003. I find that both trust and rule of law are significant for starting firms that expect to create 20+ new jobs in 5 years, my proxy for Schumpeterian entrepreneurship. This finding counters prior literature that suggests that rule of law and trust are significant for all forms of entrepreneurial activity. My third essay, co-authored with Katherine Terrell, studies the effects of a woman's life and work values, derived from her culture, on the likelihood of female participation in the labor market and self-employment using religion as an instrument using data from various points in time for 82 countries. First, we find that women with the life value that 'men should have scarce jobs before women' are less likely to enter the labor force than woman who do not hold this value. Second, we find that work values of initiative, achievement, and respect are correlated with entrepreneurship and influenced by culture. Men tend to hold these values to a greater degree than women and are also more likely than a woman to be an entrepreneur for a given unit of these values. Hence, we find higher rates of entrepreneurship in countries/cultures where women are more likely to hold these values.