Economic Crises And Entrepreneurship: A Comparison Of Developed And Less Developed Countries

This paper examines the change in entrepreneurial activity in developed and less developed countries during the period surrounding the 2008-2009 Global Crisis. The paper also examines how several entrepreneurship-related factors including costs, taxes, number of procedures, legal rights and credit coverage had changed for the two groups of countries after the Global Crisis. For the developed nations, we find that most factors had not significantly changed from the pre-crisis period to the post-crisis period. Out of the eighteen factors that are examined, only three had significantly changed. The cost to export had worsened (i.e. increased), while the number of tax payments and the time required to start a business had improved (i.e. declined). When we look at new business formation, we find that for the developed nations, there was no significant change in new business density and new business registrations. For the less developed nations, we find that most factors had significantly changed from the pre-crisis period to the post-crisis period. Out of the eighteen factors that are examined, fifteen had significantly changed (i.e. two of them worsened and thirteen of them improved). The “cost to export” and the “cost to import” both worsened (i.e. increased). On the other hand, the cost of business start-up procedures, the number of tax payments, the total tax rate, the legal rights, the number of procedures to register property, to start a business, the time required to build a warehouse, to register property, to start a business, to prepare and pay taxes, the credit depth, the private credit bureau coverage, and the public credit registry coverage all improved. For the less developed nations, similar to the developed nations, we find that there was no significant change in new business density and new business registrations. We conclude that, in terms of the entrepreneurial environment, the Global Crisis had a more negative impact on less developed nations when compared to developed nations. While entrepreneurial activity had not significantly changed in both groups, the less developed countries achieved this by improving several different aspects of the entrepreneurial environment. In order to protect their entrepreneurs, they had to be more proactive when compared to the developed nations.