The Decision to Start a New Firm: An Econometric Analysis of Regional Entrepreneurship in Tunisia

Understanding the factors that promote or mitigate transitions into self-employment is crucial to regional economic development efforts, while the number of new business created play a significant role to regional economic vitality and represent a major signal of a dynamic economy. We use a new measure of firm formation based on the combination between individual background with effects depending on the regional context in Tunisia such as entrepreneurial human capital and labour force characteristics. Even though some of these factors have been the subject of several entrepreneurship studies, it is still difficult to identify which one impact significantly the decision to create a new firm.As an illustration, the model is estimated using a data provided by the National Tunisian Global Entrepreneurship Monitor (GEM) 2010 Project, based on the analysis of a sample of 1966 cases. The main findings of the study show that “competencies” measured by the two variables “knowing someone personally who started a business in the past 2 years” and “presence of good opportunities for starting a business” increase significantly the probability to create a new venture. In addition, we have found that the interaction between these two factors has a positive influence. However, “fear of failure” influences negatively the decision to start up. Finally, some fixed region-specific factors notably the average real wage of a region must be accounted for when estimating regional self-employment relationships. We discuss the implications of our results for policy-makers with useful information in designing and implementing policies to promote enterprise development.