The responsiveness of entrepreneurs to working time regulations

Frank Stephen, David Urbano, Stefan Van Hemmen

Research output: Contribution to journalArticlepeer-review

Abstract

In this article, we analyse the impact of enforcement practices (proxied by judicial formalism) and the regulation of working time on entrepreneurial activity by opportunity. We find that higher enforcement formalism mitigates the negative impact exerted by rigid working time regulations on the number of entrepreneurs. While it is agreed that regulatory rigidities may increase labour transaction costs, we show that entrepreneurs are less sensitive to labour regulations the higher the level of enforcement formalism in which they operate. Higher formalism is associated with lower enforcing efficiency and lower probability of being punished for transgressing laws. A policy implication is that encouraging labour flexibility might not improve conditions for entrepreneurial activity in procedurally formalist countries. This is due to the fact that, in those countries, flexibility de facto characterises employment relations, no matter what the law says. © 2008 Springer Science+Business Media, LLC.
Original languageEnglish
Pages (from-to)259-276
Number of pages17
JournalSmall Business Economics
Volume32
Issue number3
DOIs
Publication statusPublished - Mar 2009

Keywords

  • Compliance
  • Entrepreneur
  • GEM
  • Judicial Formalism
  • Labour contracts
  • Observance
  • Opportunity entrepreneurship
  • Rigidity of hours
  • Working time

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