Does Capital Account Liberalization Spur Entrepreneurship: The Role of Financial Development
Round 1
Reviewer 1 Report
- In Table 4, Kaopen, PC, LE have different effect on the dependent variable. Please describe the difference of the effects in detail.
- In Table 2 and 3, please show the descriptive statistics of correlation matrix of the variable for two cases(developed counties and developing country).
- The analysis includes AR(1), AR(2). Why do the analysis include ARIMA model? The ARIMA model is more general model to investigate the delayed effects of Kaopen, PC etc. Please apply the ARIMA model into the proposed model. Then find the exact model to explain the proposed model by analyzing the ARIMA model.
Author Response
Please see the attachment.
Author Response File: 
Author Response.pdf
Reviewer 2 Report
Sustainability review Capital liberalization
I enjoyed reading this manuscript as it was well researched and quite well written. The authors displayed extensive understanding of both capital and financial market liberalization and entrepreneurship and it's underpinnings. This meant day introduction and literature review flowed well, where logical, and could build effectively toward the hypothesis. I have some specific comments on the hypothesis but these are not major concerns just minor improvements.
- There are many minor grammatical errors throughout the paper however this tiny had a limited impact on readability and can be easily remedied with extensive proofreading and final edits.
- In excerpts such as this “(1) it is difficult to establish new enterprises and the number of enterprises is small; (2) countries with serious capital allocation efficiency problem have too many small-scale enterprises, which fails to create the economies of scale for enterprises, and it causes too many entrepreneurs to run small enterprises and too few entrepreneurs to run large enterprises; (3) those who are more efficient but lack assets are unable to become entrepreneurs due to financing constraints, while those who are rich but less efficient continue to stay in the industry, which leads to a further decline in the efficiency of resource use, thus greatly reducing the total entrepreneurship of a country. In the case of capital account liberalization reforms in developing countries” the wording is quite clumsy, which provides clear evidence that the many citations used in the paper haven’t been consulted sufficiently for use of appropriate terminology. It is not a terrible thing to be using laymen’s language, but even many laymen would phrase these points differently. This undermines the positive contribution of the paper.
- A number of metrics including the GINI index and capital flow indices point to developing countries benefiting positively from globalization up until the global financial crisis of 2008. From that point onwards a dramatic change occurred in which debt levels of developing economies balloon and economic and development in many instances stagnated. The reason why I raised this point is that a longitudinal analysis void incorporate this as an event which more than being calculated into a test such as a Chow test or other to undertake the event analysis.
- It was positive to see a number of citations on R&D spillovers and other forms of spillover which have formed a substantial line of inquiry which integrates international business and entrepreneurship particularly led by Zoltan Acs and David Audresch.
- In an area such as this which seeks to understand causal relationships between capital liberalization and entrepreneurship it is often difficult 2 distill the causal flows. It is also difficult to gauge the impact of informal capital markets which flourish in developing countries in all their forms coma and can be both positive and very negative, many examples such as Grameen Bank in Bangladesh.2 positive informal capital market structures but these are designed to overcome the very negative operators and markets which stifle entrepreneurship due to exorbitant interest rates and fees.
Specific comments
- In: “Hypothesis 1. The impact of capital account liberalization on entrepreneurship in 177 developed economies is positive while and the impact of capital account liberalization 178
on entrepreneurship in developing economies is negative.”, could be simplified to: Hypothesis 1. The impact of capital account liberalization on entrepreneurship developed economies is positive while the impact of capital account liberalization on entrepreneurship in developing economies is negative. This is a representative sample that you are seeking to extrapolate to a population, so you don’t need to just refer to the sample. - With “Hypothesis 2. The negative impact of capital account liberalization on entrepreneurship in developing economies is mitigated by a high degree of domestic financial development.” Domestic financial development is a moderator, but the hypothesis concerns in that is framed in a way that is not impartial and expects a one tailed test and consequent outcome. I suggest reworking this hypothesis, which would not impact the model or results substantially.
- It will be interesting to see the impact of global taxation agreements treaties and policies on capital liberalization. This may well have a further impact on developing countries however that impact could either be positive or negative and could be and interesting line of inquiry for further research stemming from this paper.
Results
- The modeling was well argued and well structured with extensive support from existing approaches which are combined in an incrementally novel way.
- I may have missed this, but is L.NBD logged NBD? I was struggling with this variable as the formal registration of businesses in developed countries is much higher than in developing. This would impact the results, but if the NBD is logged it will have a differential impact which may be seeking to be compensatory. If it is not in here, it needs to be explained much more comprehensively as it would have a material impact on the model and results.
- You have used time fixed effects in here, which certainly seems appropriate, however even these fixed effects mask nonlinear data over the observation period. I would suggest again that in considering the global financial crisis as an event which greatly impacted all countries in the population but evidence points to far more negative impacts on developing countries - this needs to be understood more extensively and modelled effectively. Making this a truly longitudinal analysis would offer greater insights, more probe-able results, extensive policy implications, and offer a range of pathways for further research.
- The tests undertaken and in particular the robustness tests and the endogeneity tests we're well constructed and the results supportive of the overall validity of the model.
Overall
This manuscript is worthy of a revise and resubmit. However I also believe that tackling the modelling on a truly longitudinal basis, going well beyond just time fixed effects, and distilling out results for years and time periods would produce a much more valuable and cite-able paper.
Author Response
Please see the attachment.
Author Response File: Author Response.pdf
Reviewer 3 Report
The article is very interesting and the methods used are well chosen. Entrepreneurship has been raised many times by numerous authors. When analysing developing countries, reference should be made to the studies devoted to them. There is no clear information how developed and developing countries have been divided. The inference carried out and the selected variables seem correct, because indicators such as self- employment rate and number of inventions and patents are debatable. One should agree with the authors that there is still no clear criterion for the development of entrepreneurship. It seems that such an indicator is impossible to develop (especially in global terms) due to the diversity of legal and cultural conditions in enlarged countries. It seems that an important element in the issue of economic liberalisation is globalisation and the role of international corporations, which were omitted in the study.
Author Response
Please see the attachment.
Author Response File: Author Response.pdf
