Institutions, entrepreneurial adaptation, and the legal form of the organization

What is it about?

This study draws upon the framework of institutional theory and attempts to find the determinants of the initial legal structure for around 5,000 startups in the United States. The results show that economic freedom in general and labor market freedom, in particular, is a significant determinant in the choice of legal structure. The findings also report that the majority of startups do not change their legal form, but of those that do change the legal structure show a higher survival rate. This study recognizes the importance of institutional freedom and legal counseling for startups to reduce the rate of business failure.

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