Speed to Legal Registration and Nascent Venture Performance: A Temporal Dilemma for Nascent Entrepreneurs in an Emerging Economy

Abstract

In this paper, we examine the effect of a nascent venture's speed to legal registration during its formation on the initial venture performance in an emerging economy. Quickly obtaining legitimacy via legal registration in the early stages of a new venture's formation accelerates its resources acquisition and transition to other start-up activities, facilitating the venture to seize dynamic entrepreneurial opportunities; however, in an emerging economy, quick legal registration also incurs substantial costs and compliance activities that may inhibit the venture's engagement in other start-up activities. A nascent venture in an emerging economy suffers from being either too fast (early) or too slow (late) in registering its business during the formation process, and the relationship between the speed to registration and nascent venture performance is best reflected by an inverse U-shape. Moreover, the inverse U-relationship becomes more pronounced when the entrepreneurial opportunity is more innovative. Based on analyzing 145 nascent entrepreneurs from the event history data set of the China Panel Study of Entrepreneurial Dynamics (CPSED), we found strong support for our arguments.