INNOVATIVE ENTREPRENEURSHIP

The purpose of this empirical study is to shed light on the relationship between tax policy and innovative entrepreneurship. This study contributes to the growing discussion on how tax policy in the form of corporate and consumption tax rates affects the willingness of entrepreneurs to engage in process innovation. Logistic regression analysis will be applied to data that has been gathered from the Global Entrepreneurship Monitor 2011 and World Competitiveness Yearbook, which consists of 132,130 individuals from 60 countries, of which 13,355 are entrepreneurs and of which 4,709 are innovative entrepreneurs that engaged in process innovation. Prior research suggests that the entrepreneurial propensity to innovate is negatively influenced by government regulations, which subsequently impact technological conditions that are crucial for economic growth and social welfare. Contradicting the expectations of this study, the results show that there is no clear evidence of a relationship between corporate tax rates and process innovation. Similarly, the results also displayed that no significant relationship can be found between consumption tax rates and process innovation among entrepreneurs.