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Taxes, start-up costs, and innovative entrepreneurship

Pourya Darnihamedani, Joern Hendrich Block, Jolanda Hessels () and Aram Simonyan
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Pourya Darnihamedani: Tilburg University
Joern Hendrich Block: Erasmus University Rotterdam
Jolanda Hessels: Erasmus University Rotterdam
Aram Simonyan: National Academy of Science of the Republic of Armenia

Small Business Economics, 2018, vol. 51, issue 2, 355-369

Abstract: Abstract Prior research investigates the role of start-up costs and taxes with regard to entrepreneurship. Yet, little distinction is made regarding the type of entrepreneurship, particularly innovative versus non-innovative entrepreneurship. We shall argue that start-up costs and taxes are associated in different ways with innovative versus non-innovative entrepreneurship. Taxes being recurring costs should mainly relate to innovative entrepreneurship, whereas start-up costs being one-off costs should mainly relate to non-innovative entrepreneurship. Analyzing a dataset of 632,116 individuals, including 43,223 entrepreneurs from 53 countries, we can partially confirm our predictions. Corporate taxes show a negative relationship with innovative entrepreneurship, whereas income taxes seem to have no relationship. High start-up costs have a positive relationship with innovative entrepreneurship, although this finding only holds true in cross-sectional investigations. Our paper contributes to the discussion on how governmental regulation and taxes relate to entrepreneurship.

Keywords: Innovative entrepreneurship; Corporate taxes; Personal income taxes; Start-up costs; GEM; L26; H24; D24 (search for similar items in EconPapers)
Date: 2018
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