The Impact of Regulations on Small Firm Characteristics

Regulations are shown to have a significant impact on entrepreneurial activity, especially startups by smaller firms. Higher compliance costs deter small firms entering new industry. In this study, using state-level regulation data in the U.S., we examine whether different types of regulations (including “health and safety regulations”, “employment “tax code”, “licensing “environmental “zoning regulations”) each state do business that state. We also type deters certain industries or operate more fewer states. Besides size, operational area, industry, younger Our results show regulations” affect firm size but not area age. states with high scores these areas, there single-employee 2-20 employee when compared other Also, score find 51 100 employees On hand, age size. established less than year ago. Finally, regulations, generally, “Business” industry “Writing” Overall, how operating This is important because if wants attract (i.e., younger, older firms, larger industries), officials need improve corresponding first.