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Democratizing Entry: Banking Deregulations, Financing Constraints, and Entrepreneurship

William Kerr () and Ramana Nanda ()

No 07-033, Harvard Business School Working Papers from Harvard Business School

Abstract: We examine entrepreneurship and creative destruction following US banking deregulations using Census Bureau data. US banking reforms brought about exceptional growth in both entrepreneurship and business closures. The vast majority of closures, however, were the new ventures themselves. Although we do find evidence for the standard story of creative destruction, the most pronounced impact was a massive increase in churning among new entrants. We argue that creative destruction requires many businesses failures along with the few great successes. The successes are very difficult to identify ex ante, which is why democratizing entry is an important trait of well-functioning capital markets.

Keywords: banking; financial constraints; entrepreneurship; creative destruction; growth. (search for similar items in EconPapers)
JEL-codes: E44 G21 L26 L43 M13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-ent, nep-mac and nep-tid
Date: 2006-12, Revised 2008-10
References: View references in EconPapers View complete reference list from CitEc
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http://www.hbs.edu/research/pdf/07-033.pdf Revised version, 2008 (application/pdf)

Related works:
Journal Article: Democratizing entry: Banking deregulations, financing constraints, and entrepreneurship (2009) Downloads
Working Paper: Democratizing Entry: Banking Deregulations, Financing Constraints, and Entrepreneurship (2007) Downloads
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