Linking business ownership and perceived administrative complexity

Administrative burdens are known to be a major business constraint for incumbent small to medium‐sized enterprises (SMEs) in modern economies. Far less is known about the influence of these burdens on the start‐up of new firms. The current paper aims to examine to what extent perceived administrative complexity related to starting a new business influences the number of business owners across 18 OECD countries.

The article combines data on business ownership from EIM's COMPENDIA database and data on perceived administrative complexity from the Eurobarometer public opinion surveys coordinated by the European Commission. This regression model enables one to explicitly control for the influence of unemployment on the level of business ownership (“refugee effect”). There is also control for risk tolerance and access to finance.

The results suggest that administrative complexity is negatively related to business ownership. When administrative procedures related to business start‐up are complex, potential entrepreneurs are discouraged from starting a new firm.

Owing to data constraints, the temporal specification of the independent variables is not ideal. Therefore the findings in this paper should be regarded as exploratory.

The results suggest that it is important not only to reduce administrative burdens in order to increase the number of new firms, but also for governments to communicate existing administrative regulations to a country's population.

This is one of the first attempts to empirically link business ownership and perceived administrative complexity related to starting a new business for a large number of countries.