The legal structure as a determinant of business dynamics

Resumen

LEGAL STRUCTURE AS A DETERMINANT OF BUSINESS DEMOGRAPHY Over the last few decades, the areas of business demography and entrepreneurship have attracted the attention of many scholars and policy makers. The complex processes of firm creation, closure and survival have been the focus of empirical studies on the evolution of the business population. In fact, it is commonly accepted by policy makers that new ventures contribute to economic growth, innovation, and employment creation. However, new firms face serious difficulties and, in the medium run, the vast majority of them disappear. The factors that influence business demography have been analyzed from various theoretical approaches. External and internal characteristics of firms, entrepreneurs' characteristics, and institutional environment are recognized as factors that influence the creation, survival and closure of firms. The legal structure of firms is a choice variable since it determines the owners' rights and limitations, access to external funding, and the tax scheme firms face. Little attention has however been paid by researchers to the effect of the legal structure on firm dynamics. The aim of his study has been to investigate this issue further. In fact, this study focuses on the analysis of business demography from the perspective of the legal structure of firms. More concretely, three general objectives were sought: a) to determine if the legal structure is a determinant of firm dynamics (i.e., entry, closure, survival); b) to establish if the determinants of business dynamics are independent from legal structure; c) to analyse the substitution process amongst firms with various legal structures. In order to reach these objectives, the study focused on the behavioural patterns of three associative legal structures (i.e. limited-liability companies, publicly-traded companies, and worker cooperatives) in the Basque Country over the 1993-2002 period. Major original contributions of this study to research on business demography and entrepreneurship are as follows: a) the inclusion of legal structure as a determinant of firm entry, closure and survival processes; b) the analysis of competition patterns within and between various legal structures; c) empirical analyses based on multi-perspective models. First a descriptive analysis of the Basque business demography from the legal structure perspective is provided in Chapter 1. The dynamic processes of market entry (Chapter 2), firm closure (Chapter 3), and venture survival (Chapter 4) are then investigated. Finally, some general conclusions (Chapter 5) based on the entry, closure and survival patterns of the analysed legal structures are drawn, and some observations on the competition between firms with various legal structures are made.