Moving beyond the negative effect of the regulation of entry: Disentangling causality in new venture creation decisions

Abstract

How and to what extent can entry regulations today still affect start-up decisions across regions and countries before formal new venture creation? This study draws on an overarching institutional framework and conducts two experiments in which we uniquely subject 634 Belgian, Dutch and German nascent entrepreneurs to multiple real regulatory scenarios for starting a new limited liability company. By disentangling how and to what extent different entry regulations and particular components of the regulation of entry can impact start-up decisions across regions, the experiments provide new very granular insights to move beyond existing knowledge about the negative association between entry regulations and new venture creation. Next to this, interestingly, after several robustness analyses, in both experiments, regional and informal institutional factors do not moderate the negative impact of the regulation of entry. In other words, across regions in this study, nascent entrepreneurs do not react significantly differently to the impact of different regulatory start-up conditions. We discuss how these results contribute to the regulatory institutions and entrepreneurship literature and address policy implications.