Determinants of the Prevalence of Start-ups and High-Growth Firms

Per Davidsson () and Magnus Henrekson ()
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Per Davidsson: Jönköping International Business School, Postal: Box 1026, SE-551 11 Jönköping, Sweden

No 381, Working Paper Series in Economics and Finance from Stockholm School of Economics

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 (search for similar items in EconPapers)
JEL-codes: H30 J21 L52 M13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind and nep-lab
Date: 2000-05-03, Revised 2002-07-08
Note: Forthcoming in Small Business Economics, Vol. 16, 2001
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Published in Small Business Economics, 2002, pages 81-104.

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Journal Article: Determinants of the Prevalence of Start-Ups and High-Growth Firms (2002)
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