Rule of law and regulatory quality as drivers of entrepreneurship

This paper investigates empirically the effects of institutions on new business formation in the Italian provinces over the period 2004-12. According to the results, local institutional quality positively affects entry rates, and its impact is stronger in high-tech industries. Among different institutional dimensions, rule of law turns out to be more important in southern lagging regions, while regulatory quality seems more relevant in the developed centre-north. In times of crisis, institutional quality loses importance in determining entries, which become more sensitive to the propensity to innovate and to human capital and infrastructural endowments.