FEATURE
PAPER
Legal
Infrastructure and Entrepreneurship: An International Comparison
The
following paper was presented at the 2006 USASBE Conference.
It was written by Aron S. Spencer and Bruce A. Kirchhoff
of The New Jersey Institute of Technology.
Abstract
Property rights
and the legal system of countries are widely believed to
have a major impact on entrepreneurship. This paper analyzes
country-level data from several sources, covering business
environment, economic freedom, and entrepreneurship levels, and
determines
that, although
there is a relationship between legal structures and entrepreneurship,
it is not straightforward.
There is a sharp distinction between the relationship in developed
countries and that in less
developed countries. Further, there appears to be no relationship
between entrepreneurship and
short-term economic growth.
Introduction
There has been greater and greater recognition of the effects of property rights and legal
infrastructure on economic growth and development. It is believed that the role of government in
determining the transparency and enforceability of property rights and other aspects of legal
infrastructure is a critical factor in the ability of the private sector to generate both jobs and
revenue. There is a particularly large impact on small business and entrepreneurship.
The initial inspiration for this paper was the work of Hernando de Soto, in his work The Mystery
of Capital (2000). This work extended his previous research in Peru (de Soto and Iacono 1989)
to include several other countries. de Soto found a strong relationship between the strength and
transparency of property rights and the level of economic development of the country. He
proposed that property rights allowed the conversion of property (real capital) into money
(financial capital), which thus allowed property owners to finance business startup and
expansion. In countries without strong property rights, he found that although people may de
facto own property, the difficulty of registering property and/or obtaining clear legal title to it
means that de jure, most of these same people are considered squatters or the equivalent.
Promoting the formation of new small businesses — entrepreneurship — is an important part of
ensuring the economic well being of a country. Other research has shown that small businesses
form the bulk of all net new jobs and contribute significantly to economic growth (for example
Birch (1979; 1987) and Kirchhoff (1994) in the U.S., Storey (1994) in the UK, and Baldwin
(1995) in Canada). Entrepreneurs drive innovation (Schumpeter 1934; SBA 1995; SBA 1996)
and help protect an economy against a socialist revolution (Schumpeter 1942).
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the Entire Paper...
TIP
OF THE WEEK
Executive
Summary from NFIB National Small Business Poll Payroll
Seventy-two
(72) percent of small-business employees work full-time.
Forty-five (45) percent of small-business owners
pay their full-time employees weekly; 26 percent
pay them every other week; 13 percent, twice a month;
6 percent, monthly; and, the remainder at other intervals
or differing intervals for different full-time employees.
Ninety (90) percent
pay their part-time employees at the same time that
they pay their full-time employees.
Most small employers
(64%) sill prepare payroll in-house. However, 19
percent use a payroll services company and another
14 percent hire an outside
accountant or bookkeeper to prepare theirs. Those
with the smallest enterprises are most likely to
do payroll in-house and those
with the largest to send it out. Even then, half
of the largest, those businesses employing 20 or
more, do payroll in-house.
The owner/manager is
the person who most often (55%) does payroll when
it is prepared in-house. An employee does it in 29 percent of
cases and an unpaid
spouse or family member in 14 percent.
Only 62 percent of those
doing payroll in-house use an electronic spreadsheet
of some kind to calculate payroll; 33 percent have their payroll
systems
electronically tied to their accounting software.
Size-of-business is highly associated with a computerized payroll
system.
The most common reason
given (37%) for doing payroll in-house is that it
is the cheapest way. Owners of the smallest are disproportionately
likely to
mention this reason. Another 32 percent say keeping
payroll in-house gives them greatest control and better oversight.
The data to prepare
payroll is often sent to vendors on paper rather
than electronically. About half who use an outside accountant
or bookkeeper submit
their payroll records on paper. One in four who use
a payroll services company submit theirs on paper.
The most frequently
cited reason for using a payroll service company
is that it takes care of everything; it is comprehensive (45%).
Other common reasons
include: the most effective way to do payroll (17%),
allows smoother work flow for in-house personnel (14%), and yields
fewer mistakes
or errors (11%).
Forty-two (42) percent report that they deposit federal payroll taxes quarterly, 27 percent monthly, and 13 percent more frequently.
Twenty-six (26) percent offer their employees an option to deposit their payroll checks directly into a checking or savings account. Fifty-seven (57) percent of employees take advantage of the option.
Sixty-three (63) percent of small employers who have direct deposit for employees say it has been generally helpful to the business compared to only 1 percent who consider it a hassle. The principal reason for having or not having direct deposit is employee interest or lack thereof.
The W-4 is one of the least burdensome paperwork requirements of the federal government.
| William
J. Dennis, Jr. NFIB
National Small Business Poll Volume 6, Issue 1.
2006. p1. |
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CONFERENCES
UAEDRP
|
| Who: |
University
of Arizona Economic Development Research Program
|
| What: |
39th
Annual Arizona Economic Development Course
|
| Where: |
Tucson,
Arizona, USA |
| When: |
January
21-25, 2007 |
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NCIIA
|
| Who: |
National
Collegiate Inventors & Innovators Alliance
|
| What: |
11th
Annual Meeting
|
| Where: |
Quorum
Hotel Tampa - Tampa, Florida, USA |
| When: |
March
22-24, 2007 |
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N/A
|
| Who: |
Alfred
University College of Business, Penn State University-Altoona
Department of Business and Engineering, & University
of Guam School of Business and Public Administration
|
| What: |
Doing
Business in the Global Economy
|
| Where: |
Marriott
Hotel Resort and Spa, Tumon, Guam |
| When: |
March
5-6, 2007 |
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EFP
|
| Who: |
Eye
For Procurement
|
| What: |
Supplier
Management Forum 2007
|
| Where: |
Miami,
Florida, USA |
| When: |
April
17-18, 2007 |
|
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FFI
|
| Who: |
Family
Firm Institute
|
| What: |
Annual
Conference
|
| Where: |
Fairmont
Turnberry Isle Resort & Spa in North Miami
Beach, Florida, USA |
| When: |
October
17-20, 2007 |
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CALLS FOR PAPERS
HIC
|
| Who: |
Hawaii
International Conference |
| What: |
27th
Annual Hawaii International Conference on Business
|
| Where: |
Waikiki
Beach Marriott Resort & Spa, Honolulu Hawaii,
USA |
| When: |
May
24-27, 2007 |
Submission
Deadline:
January 19, 2007
|
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ICSB
|
| Who: |
International
Council for Small Business (ICSB)
|
| What: |
ICSB
World Conference 2007
|
| Where: |
Turku,
Finland |
| When: |
June
13-15, 2007 |
Submission
Deadline:
January 20, 2007
|
|
|
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IFERA
|
| Who: |
International
Family Enterprise Research Academy
|
| What: |
7th
Annual IFERA Conference 2007
|
| Where: |
European
Business School, Oestrich-Winkel, Germany |
| When: |
June
20-23, 2007 |
Submission
Deadline:
February 10, 2007
|
|
|
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AMA
|
| Who: |
Atlantic
Marketing Association
|
| What: |
Atlantic
Marketing Association Annual Meeting
|
| Where: |
New
Orleans, Louisiana, USA |
| When: |
September
26-29, 2007 |
Submission
Deadline:
April 17, 2007
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