International financial integration and entrepreneurial firm activity

Description

We explore the relation between international financial integration and the level of entrepreneurial activity in a country. We use a unique firm-level data set in a broad sample of developed and developing countries, which enables us to present both cross-country and industry-level evidence. We find a positive robust correlation between de jure and de facto measures of international financial integration and proxies for entrepreneurial activity such as entry, size, and skewness of the firm-size distribution. We then explore potential channels through which foreign capital may encourage entrepreneurship. We find that entrepreneurial activity is higher in industries which have a large share of foreign firms in vertically linked industries. Second, we find that entrepreneurial activity in industries which are more reliant on external finance is disproportionately affected by international financial integration.

Subjects

Series Statement

• Working paper / Division of Research, Harvard Business School -- 07-012
• Working paper (Harvard Business School. Division of Research) -- 07-012.

Other Editions

• International financial integration and entrepreneurial firm activityHarvard Business School2006-01-01
• International financial integration and entrepreneurial firm activityNational Bureau of Economic Research2007-01-01