Genetic distance and the difference in new firm entry between countries

Does genetic distance between countries explain differences in the level of entrepreneurship between them? Genetic distance, or very long-term divergence in intergenerationally transmitted traits across populations, has been recently tied to a variety of outcomes ranging from differences in economic development to differences in risk preferences between countries. Extending this recent work, we ask whether the genetic distance between countries is associated with differences in new firm entry. Based on a sample of 103 countries and 5253 country-pair observations and controlling for a large variety of factors, we find that genetic distance is positively associated with between country differences in new firm entry. The effects sizes, as expected, are small. In assessing the differences in entrepreneurial activity between country-pairs, policymakers could consider adjusting for genetic distance as an explanation for differences in entrepreneurial activity.