DP7752 Entrepreneurial Innovations, Entrepreneurship Policy and Globalization

Author(s): Robin Douhan, Pehr-Johan Norbäck, Lars Persson
Publication Date: March 2010
Keyword(s): Entrepreneurship, Innovation, Lobbying, Market Integration, Regulation
JEL(s): D73, F15, L26, L51, O31
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7752

What explains the world-wide trend of pro-entrepreneurial policies? We study entrepreneurial policy in a lobbying model taking into account the conflict of interest between entrepreneurs and incumbents. It is shown that international market integration leads to more pro-entrepreneurial policies. It is then more difficult to protect the profits of incumbents from entrepreneurial entry and pro-entrepreneurial policies make foreign entrepreneurs less aggressive. Using the World Bank Doing Business database, we find evidence that international openness reduces barriers to entry for new entrepreneurs and that the effect is stronger in countries with more rent-seeking governments.