A COUNTRY'S GROWTH-ASPIRING ENTREPRENEURSHIP ORCHESTRATES THE INTERPLAY BETWEEN CORPORATE TAXATION, VENTURE CAPITAL AVAILABILITY, AND SOCIAL LEGITIMACY

Abstract

We examine the boundary conditions for the corporate tax rate and the growth of aspiring entrepreneurship relationships across countries. We argue that the effect of corporate tax on entrepreneurial growth aspirations is moderated by the availability of venture capital, which is then moderated by whether local social norms celebrate entrepreneurial success giving rise to a three-way interaction effect. We test our argument with a panel data analysis of 382 country-year observations for 78 countries from the Global Entrepreneurship Monitor (GEM), World Economic Forum (WEF), and World Bank databases. Our results reveal a significant three-way interaction effect with a diminished negative impact of corporate tax rates on growth-aspiring entrepreneurship when venture capital is available and when the social legitimacy of entrepreneurship is strong. Our findings imply that venture capital is an essential financial institution offering advisory support with finance to help entrepreneurs persist with their aspirations. Policymakers must note while tax generally inhibits entrepreneurship, growth aspiring entrepreneurs will continue with their efforts when the state facilitates the entry of venture capitalists into the local market and when the state makes deliberate attempts to promote and celebrate entrepreneurial behavior.