Entrepreneurship

To measure entrepreneurial activity, annual data is collected directly from 139 company registrars on the
number of newly registered firms over the past nine years. The data can help answer such questions as
these:

 What are the trends in new firm creation across regions and income groups?
 What is the relationship between entrepreneurship and the business environment and financial
development?
 How much did the financial crisis affect entrepreneurial activity in the formal sector?
Data is provided on new business entry density, defined as the number of newly registered corporations
per 1,000 working-age people (those ages 15–64). As in the World Bank’s annual Doing Business report,
the units of measurement are private, formal sector companies with limited liability.The data was collected
with the support of the Kauffman Foundation.
Why it Matters
Entrepreneurial activity is a pillar of economic growth. For evidence of the economic power of
entrepreneurship, we need look no further than the United States, where young firms have been shown to
be a more important source of net job creation than incumbent firms. The Entrepreneurship Database is a
critical source of data that facilitates the measurement of entrepreneurial activity across countries and
over time. The data also allows for a deeper understanding of the relationship between new firm
registration, the regulatory environment, and economic growth. Previous research using the
Entrepreneurship Database has shown a significant relationship between the level of cost, time, and
procedures required to start a business and new firm registration.

Data from 139 economies on the number of newly registered firms per year over the period 2004-2012
can help answer questions regarding trends in new firm creation, the relationship between
entrepreneurship and the business environment, and the effect of the financial crisis on entrepreneurial
activity. Additional data on the function, structure and automation of business registries provides valuable
insight into the impact of registration, and information and communication technology (ICT) reforms on
new firm registration.

Methodology
What is the Entrepreneurship Database?
The Entrepreneurship Database is a unique source of comparable, cross-country data on new business
registration aimed at facilitating a greater understanding of the dynamics of private enterprises around the
world. The main Entrepreneurship Database indicator measures new business entry density, which is the
number of newly registered firms, in which ownership liability is limited to its investment, per calendar
year, normalized by population. This is a valuable indicator which quantifies the impact of regulatory,
political, and macroeconomic institutional changes on new business registration, a vital component of a
dynamic private sector.
Nevertheless, it should be noted that the data itself only provides a snapshot of a given economy’s
business demographics, and cannot by itself explain the factors that affect the business creation cycle.
However, when the Entrepreneurship Database is combined with other data such as the Doing Business
Report, Investment Climate Assessments, and/or OECD Entrepreneurship Indicators, researchers and
policymakers can better understand the dynamics of the business creation process.
Data Collection
The Entrepreneurship Database and Doing Business have jointly developed a data collection
methodology to systematically measure entrepreneurial activity. The 2013 Entrepreneurship Database
contains annual data on the number of newly registered firms over the period of 2004-2012 (Excel,
80KB). To facilitate cross-country comparability, the Entrepreneurship Database employs a consistent unit
of measurement, source of information, and concept of entrepreneurship that is applicable and available
among the diverse sample of participating economies.
The data collection process involves telephone interviews and email correspondence with business
registries in over 150 economies. The main sources of information for this study are national business
registries. See complete list of sources. In a limited number of cases where the business registry was
unable to provide the data – most often due to an absence of digitized registration systems – the
Entrepreneurship Database uses other alternatives sources, such as statistical agencies, tax and labor
agencies, chambers of commerce, and private vendors or publicly available data.
Definition of the Variables
The definition of entrepreneurship used is limited to the formal sector. Yet, it should be noted that the
exclusion of the informal sector is based on the difficulties of quantifying the number of firms that
compose it, rather than on its relevance for developing economies. The Entrepreneurship Database
facilitates the analysis of the growth of the formal private sector and the identification of factors that
encourage firms to begin operations in or transition to the formal sector.
Newly Registered Companies with Limited Liability: the main input for calculating the new business
entry density rate is the number of newly registered companies with limited liability (or its equivalent), per
calendar year. Importantly, limited liability is a concept whereby the financial liability of the firm’s members
is limited to the value of their investment in the company. It is a separate legal entity that has its own
privileges and liabilities. This study collects information on all limited liability corporations regardless of
size. Partnerships and sole proprietorships are not considered in the analysis due to the differences with
respect to their definition and regulation worldwide. Data on the number of total or closed firms are not
included due to heterogeneity in how these entities are defined and measured.
Business Entry Density Rate: the number of newly registered firms with limited liability per 1,000
working-age people (ages 15-64) per calendar year.
Population: the main source of information for the population numbers used in the Entrepreneurship
Database is the World Development Indicators. The working-age population is based on what the
International Labour Organization defines as the economically active population. Were the population
data was not available in the World Development Indicators; other sources such as the CIA and the Index
Mundi were used.
Offshore financial centers: Data collected from countries categorized as offshore financial centers by
the IMF (1) are marked as such and generally excluded from Entrepreneurship Database analysis since
registered entities in these countries may not fit our definition of entrepreneurship. The information
provided by these countries likely reflects a nontrivial amount of shell companies, defined as companies
that are registered for tax purposes, but are not active businesses.
Time
Time is recorded in calendar years. The measure captures the new companies with limited liability that
have been registered per calendar year, allowing collection of periodical statistics for the period 2002-
2012.
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1. Data collected from economies categorized by the International Monetary Fund as "Offshore Financial
Centers" are excluded from the analysis. Current list of OFC countries.