Indiana

The authors find that a lenient, entrepreneur friendly bankruptcy law encourages entrepreneurs to take risks and thus lets entrepreneurship prosper. This risk-taking can generate variety in the economy by increasing the number of firms with high growth potential, which may lead to more entrepreneurship and economic development?in short, failure may be good for the economy. The study pushes for a more informed understanding of how formal institutions governing bankruptcy matter for entrepreneurial behavior and outcomes. It emphasizes that a society that is not willing to absorb the ?pain? of having a large number of entrepreneurial failures, via an entrepreneurfriendly bankruptcy law, is not likely to reap the ?gain? of vibrant entrepreneurship development and economic growth.