Entrepreneurial Quality & Startup Growth in India

This study applies and extends the methodology developed by Guzman and Stern (2015) to estimate the quality of entrepreneurship in India, using government census data for the universe of 1,542,555 registered companies with known founding dates, spanning all 29 states in India. To our knowledge, this is the first study of its kind to quantify and characterize the quality of entrepreneurship in India based on defined growth outcomes and firm characteristics at the time of founding. For purposes of this study, we define two classes of growth outcomes: attaining a “public” corporation status within defined timeframes after founding (5- years, 10-years, and 15-years), and achieving a set annual employee growth rate. Using predictive analytics, we estimate the probability of firms achieving these growth outcomes by training and validating logistic models on 70% of the data and testing these models on a reserved 30% of the data. We then measure the quality of entrepreneurship using two key metrics: The Entrepreneurial Quality Index (EQI) and Regional Entrepreneurship Cohort Potential Index (RECPI). We examine the spatial distribution of entrepreneurial quality in India, compare results to the U.S. based on these metrics, and propose directions for future research.