Entrepreneurship Snapshots 2010 : Measuring the Impact of the Financial Crisis on New Business Registration

'The 2010 World Bank Entrepreneurship Snapshots (WBGES) provide a unique indicator of business creation around the world and facilitate the investigation of the factors that foster dynamic private sector growth. Now in its fourth year, the WBGES measure entrepreneurial activity in 115 developing and industrial countries over the six year period 2004-2009. Importantly, the data offer a distinctive and timely snapshot of the impact of the 2008-2009 financial crisis on entrepreneurial activity. There is wide variation in new business creation across countries: On average, about four new firms register every year for every 1,000 working age individuals in industrialized countries, while there is less than one new firm registered in low and low middle income countries. The data show that dynamic business creation occurs in countries that provide entrepreneurs with good governance, a strong legal and regulatory environment, and reduced red tape. The data also show that nearly all countries experienced a sharp drop in business entry during the crisis. However, industrialized countries experienced the crisis more quickly and more severely than other income groups. In addition, the degree to which the crisis impacted new firm creation is correlated with measures of crisis severity. Finally, we find that countries in which financial markets play a larger role in the domestic economy experienced sharper declines in new business registrations as a result of the crisis that paralyzed financial markets. These results can guide effective policymaking and deliver new capabilities for identifying the impact of reforms.' The East Asia and Pacific Economic Update is the comprehensive, twice-yearly review of the region's economies prepared by the East Asia and Pacific region of the World Bank. In this edition titled, Robust Recovery, Rising Risks, the report notes that output and trade flows have recovered to above pre-crisis levels throughout developing East Asia. Confidence is on the rise, and private sector investment is once again driving growth. Yet greater confidence in the region's growth prospects and concerns about tepid economic expansion in advanced economies are creating the need for policy makers to perform a delicate balancing act. In particular, the return, of large capital inflows to East Asia, has caused currencies to appreciate substantially and is leading to concerns about asset price bubbles. Emerging risks are addressed at the same time as countries are tackling medium-term challenges to sustain strong growth. I increasingly, the need for China to rebalance the economy by altering the pattern of growth and investment is becoming critical for sustainability. Commodity exporters in the region need to ensure a transparent framework to use resource-related revenues for development. The middle-income countries of the region, excluding China, need to raise investment in physical and human capital and encourage innovation if they are to eventually attain high-income status. --Book Jacket The World Bank Group Entrepreneurship Snapshots (wbges), Now In Its Fourth Year, Tracks New Business Registration Around The World; Data From This Survey Can Be Used To Study The Factors That Foster Dynamic Private Sector Growth. The Measurement Of Entrepreneurship In 112 Developing And High-income Economies Over 2004-09 Offers A Distinctive And T Imely Snapshot Of The Impact Of The 2008 Financial Crisis On Entrepreneurial Activity. Wbges 2010 Results Can Help Guide Effective Policy Making And Deliver New Capabilities To Identify The Impact Of Reforms. The Study Reveals Wide Variation In New Business Registration. On Average, About Four New Firms Register Every Year For Every 1,000 Working-age Individuals In High-income Economies, While There Is Less Than One New Firm Registered Per 1,000 Individuals In Low And Middle-income Economies. More Dynamic Business Creation Occurs In Economies That Provide Entrepreneurs With A Stable Legal And Regulatory Regime, A Fast And Inexpensive Business Registration Process, More Flexible Employment Regulations, And Low Corporate Taxes. The Data Also Show That During The Crisis, Nearly All Economies Experienced A Sharp Drop In Business Registration---a Drop That Was More Pronounced In Countries With Higher Levels Of Economic Development And In Those More Affected By The Crisis.

New businesses are likely to have been even more severely affected by the crisis than mature businesses, even in non crisis times, new and young firms tend to be more constrained than older firms which often have established reputations and enjoy easier access to finance. Given the sudden scarcity of credit and the uncertain economic outlook, it is reasonable to assume that entrepreneurs wanting to start a new business or register an existing informal business were hit especially hard by the downturn. Until now, however there has been a lack of comprehensive evidence to support this assumption. The impact of the 2008-09 financial crises on new business creation should be of special interest given the importance of entrepreneurs and young firms to the continued dynamism of the modern market economy; it is well established that a robust entry rate of new business can foster competition and economic growth. This report hypothesizes that although economies with more developed financial markets were hit harder by the crisis, they will enjoy stronger and quicker recoveries in new firm creation.

The data also show that during the crisis, nearly all economies experienced a sharp drop in business registration--a drop that was more pronounced in countries with higher levels of economic development and in those more affected by the crisis. --Résumé de l'éditeur Overview Methodology Data and statistics Entrepreneurship and business environment Entrepreneurship and the financial crisis Conclusion.