What is the relationship between industry-specific regulation and technology startups?

We examine the relationship between industry-specific regulations and startup birth rates (entry) and startup ‘deaths’ (closings) in the United States and Canada during 2012–19. Our sample contains data on thousands of active and closed technology startups in the United States and Canada that were founded between January 2012 and June 2019. We use the Mercatus Center's RegData database to capture the intensity of national-level regulations. Our findings suggest that more regulated industries may exhibit lower rates of entry and that more regulated industries are associated with a greater likelihood of a startup closing. These findings seem more robust for the US than for Canada. We discuss startup funding as a potential mechanism by which regulation may impact startup closings, using our fieldwork interviews with over 100 technology startup executives and venture capital investors.

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