Using an unbalanced panel data set covering 98 countries and the period 2004-2012, this paper aims to ascertain the extent to which the governmental, globalization and governance factors affect the formal business start-ups.
We represent government by formal constraints to starting a new business while KOF indices that measure the economic, social and political dimensions of globalization are the proxies for globalization. Governance indicators are those of the World Bank’s well-known six worldwide governance clusters.
Moreover, we include unemployment rate in the model to control for macroeconomic stability and business cycle effects. Panel regression results reveal that formal procedures hamper the business start-ups in all country groups while unemployment has negative impacts for the global panel and high-income countries.
Globalization indicators, except economic globalization, have no significant effect and the influence of governance varies among its dimensions and country groups. Overall findings infer that people who start their businesses need a credible government that makes the things easier without any political pressures, but not that regulatory monitoring, controlling and directing the business environment strictly.