Jane Zhang, (202) 473-1376, firstname.lastname@example.org, World Bank
Barbara Pruitt, (816) 932-1288, email@example.com, Kauffman Foundation
(WASHINGTON) Oct. 12, 2010 – New business registration dropped sharply in
richer countries amid the global financial crisis, but didn't change much in
many lower-income countries, according to a new World Bank survey released
The trend in 2008-2009 was driven by the global financial crisis, which began
in developed countries and hit them harder, according to The 2010 World Bank
Group Entrepreneurship Snapshots. By contrast, new business registrations in
many low-income countries, which were not as affected by the crisis, held up.
That's mainly because those countries tend to have lower rates of new business
creation to begin with, and economic shocks there tend to bring smaller
changes. It helped that some countries recently introduced new measures to
modernize business registration.
"We are providing the first evidence that the recent financial crisis has
caused a quick and sharp drop in the number of new registrations of
limited-liability firms," said Leora F. Klapper, who co-authored the report
with Inessa Love, both senior economists at the World Bank's Development
Research Group. "The findings also suggest that more dynamic business
registration occurs in countries that provide entrepreneurs with reduced red
tape and a stable investment climate."
The report, along with a companion searchable database, is funded by the Ewing
Marion Kauffman Foundation and the World Bank Group. The World Bank has
conducted the survey every two years since 2004, but this year's report
incorporated improved methodology and attracted more low-income countries as
participants, especially in sub-Saharan Africa. In total, the researchers
gathered statistics from 112 countries—mostly directly from government
registries—the highest coverage to date.
"The global financial crisis affected entrepreneurship globally, but with tight
credit market conditions, particularly in rich countries, new businesses appear
most hurt in rich countries. The quicker that policymakers can get financial
markets working again, the quicker we can expect the number of new businesses
to bounce back," said Robert E. Litan, vice president of research and policy at
the Kauffman Foundation. "We are only just beginning to understand the
importance of tracking the health of startups in an economy, and this World
Bank research advances the discussion in 112 countries."
The 2010 survey charts new business creation over time and the impact of the
financial crisis. Registrations of new firms gradually increased from 2000 to
2007, but the trend was reversed at the onset of the crisis in 2008. New
business creation slowed down, first in developed countries and then in the
rest of the world as the crisis spread. In most lower-middle income countries,
the number of new firm registrations dropped for the first time in 2009. By
then, few countries were spared.
Access the entrepreneurship database here
Read a copy of the working paper explaining the survey here
More countries are recognizing the importance of entrepreneurship to their
economies. The number of countries participating in Global Entrepreneurship
Week, an annual celebration of entrepreneurship co-founded by the Kauffman
Foundation, has surpassed 100 this year. The event will be held Nov. 15-21, 2010.
About the Development Research Group
The Development Research Group, part of the Development Economic Vice
Presidency, is the World Bank's research department. For more information,