Determinants of Business Creation

business creation

The business creation process is one of the most important aspects in a territory’s economic development because entrepreneurs generate jobs and promote innovation and mobilize resources (Schumpeter Reference Schumpeter1934). Several factors have been identified by the literature to influence the decision to start a company. However, these determinants vary according to the context and territory studied. For instance, the literature has highlighted the relevance of perception of opportunities, self-efficacy and fear of failure. Nevertheless, it is worth pointing out that these variables are more relevant in developed countries than in less-developed ones. This is because in the latter, it may be easier to find a job and individuals do not necessarily have the distinctive characteristics that the literature defines as determinants of the choice to start a company.

Moreover, it is important to consider that individuals’ motivations are also influential in the business creation process. The more an individual feels motivated to pursue a venture, the more likely they are to follow it through its life cycle. This is especially true for businesses that aim to serve a social purpose or community, or that are based on hobbies and passions.

In addition, the decision to choose a type of business structure is another important factor for business creation. There are many options available, including a sole proprietorship or partnership, which involve one or more designated owners who contribute toward expenses and share profits. A corporation, on the other hand, involves a group of shareholders and provides more legal protections for the owner.