Factors Influencing New Business Formation
Factors Influencing New Business Formation

Author(s): Andreea-Oana Iacobuţă-Mihăiță, Mariana Hatmanu Gagea
Subject(s): Economy
Published by: Editura Universitară Danubius
Keywords: entrepreneurship; business density; governance; economic environment; principal components analysis
Summary/Abstract: The purpose of this study is to identify the factors that 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 New 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. Furthermore, the hierarchical cluster analysis is used to identify groups of countries and to outline similarities and differences between them.

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