Barriers to entry index: a ranking of starting a business difficulties for the United States

Abstract

Purpose The purpose of this paper is to present a new data set documenting various costs to starting a business across the 50 US states for the year 2011. Design/methodology/approach The first ranking weights and organizes measures using principal components analysis. The second ranking averages subcomponents of the data across groups of variables with common themes. Findings Most states largely maintain their relative position across both Methods 1 and 2 despite the difference in organization and weight of variables and groups across the two ranking methods – 21 of the top 25 states remained in the top 25 in both the Methods 1 and 2 rankings. Some states experience not insignificant changes between the two indexes and a few experience substantial changes. These changes can be attributed to the importance Method 1 places upon final fees, final processing time, and application formats for the Secretary of State. Research limitations/implications A lack of empirical evidence, additional data, and a definitive theory on the impacts of barriers to entry measures for the USA constrains both how the data are presented as well as which measures were collected. This paper attempts to accommodate for this by presenting rankings derived from different methodologies. Practical implications The composite barriers to entry measures can be used in policy analysis and possible research on rent-seeking. These data can also be used to study the determinants and relative costs of entrepreneurship. Originality/value This paper presents entry-specific regulatory measures currently undocumented in the literature.

Barriers to entry: an empirical account of business creation difficulties in the United States 2011

“…From Teague (2016), data on barriers to entry for LLCs were collected using a three stage process assuming the role of a prospective entrepreneur. First, each state department's respective website was searched for data on processing times, accessibility of forms (whether you have to submit and online or paper application) and any fees.…”

“…Additionally with improvements to and the continuation of regional and subregional indexes like Teague (2016) and Slivinski (2019) other avenues of research could be pursued. For instance, do states with higher barriers to entry exhibit greater migration of citizens?…”

“…10. Teague (2016) presents two composite barriers to entry measures: one that is uniformly weighted and another weighted using principle components analysis. We choose to use the composite measure using principle components analysis as we do know empirically how various barriers to entry impact entry and exit rates across different establishment sizes.…”

How many regulations does it take to get a beer? The geography of beer regulations

“…The regulations confronting any supply chain vary dramatically across legislative jurisdictions, as U.S. policy is enforced by overlapping federal, state, and local governments (Tarko & Farrant 2019). This jurisdictional overlap is especially important in nascent industries and in small businesses where entrepreneurs must spend significant cognitive capacity on understanding regulations rather than growing their firms (Teague 2016). Indeed, places with similar geographic characteristics can have significantly different entrepreneurial outcomes due to geographic variation in regulatory constraints (Crum & Gohmann 2016; Bailey & Thomas 2017; Malone et al .…”

“…1 1 Although some indices and rankings seek to measure economic freedom (Stansel & McMahon 2018), occupational licensing (Summers 2007), and entrepreneurial constraints (Teague 2016), to the best of our knowledge, none have focused explicitly on tracking regulatory volume within a specific supply chain. …”