Factors Influencing New Business Formation

AuthorAndreea-Oana Iacobuta, Mariana Hatmanu (Gagea)
European Integration - Realities and Perspectives. Proceedings 2016
Factors Influencing New Business Formation
Andreea-Oana Iacobuţă1, Mariana Hatmanu (Gagea)2
Abstract: The purpose of this study is to identify the factors th at influence the creation of new businesses
and to point out both the differences and the similarities existing between countries and groups of countries in
terms of these influencing factors. We are mainly interested in the place Romania and Bulgaria have among
the countries of the world from the perspective of entrepreneurial spirit and its influencing factors. To capture
the level of business formation we use N ew business density from World Bank Doing business. Drawing on
the existing literature we consider for our analysis several indicators related to economic environment such as
GDP per capita, unemployment rate, inflation rate, the level of taxes, foreign direct investments and public
debt and indicators describing the quality of governance. The research uses 2014 data for 67 countries, from
all development categories, collected from Heritage Foundation database. The research results obtained with
principal components analysis show that good governance results in higher levels of GDP per capita and
income taxes and the increase of the level of business formation. Also, good governance leads to a decrease in
inflation and unemployment. F urthermore, the hierarchical cluster analysis is used to identify groups of
countries and to outline similarities and differences between them.
Keywords: entrepreneurship; business density; governance; econo mic environment; principal components
JEL Classification: C38; E02; H20; M13; O11
1. Introduction
The relationship between entrepreneurship development and economic performance has been largely
debated and unanimously acknowledged in literature and decision making.
At the same time, a wide range of psychological, sociological and economic factors are proven to
impact upon the rate of entrepreneurship: from age, religion, experience, professional status, education
to culture, trust and confidence, legislation, size of government, fiscal pressure, unemployment etc.
The influence these factors have on entrepreneurial activity and the direction and the strength of this
link vary depending on the country’s level of development (Stel et al, 2005; Kuckertz et al., 2016).
A framework for analyzing entrepreneurship in the context of both its determinant factors and impact
on economic performance is provided by Thurik, Wennekers & Uhlaner (2002, p. 163). The
researchers present the causality and feedback between society-level conditions (technological,
economic, demographic, cultural and institutional), the rate of entrepreneurship (nascent, start-ups,
1Associate Professor PhD, Alexandru Ioan Cuza University of Iaşi, Faculty of Economics and Business Administration,
Romania, Address: 11 Carol I Blvd, Iasi, Romania, Tel.: 0040 232 201070, Fax: 0040 232 2 17000, E -mail:
2Associate Professor PhD, Alexandru Ioan Cuza University of Iaşi, Faculty of Economics and Business Administration,
Romania, Address: 11 Carol I Blvd, Iasi, Romania Tel.: 0040 232 201070, Fax: 0040 232 217000, Corresponding author:

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