Strong financial laws drive scaleup growth, study finds

Countries with strong legal protection for financiers, either for banks or equity investors, are more likely to see high levels of scaleup growth, according to new research.

Veroniek Collewaert (Vlerick Business School), Thomas Standaert (Ghent University), and Tom Vanacker (Ghent University and University of Exeter) analysed 33 European countries to understand how combinations of national (creditor, shareholder, labour, and property) regulations affect the number of fast-growing young firms.

The data shows that there is no one-size-fits-all model when it comes to regulation, but countries where scaleups flourish tend to be environments where entrepreneurs can access funding more easily through either strong creditor rights or protections for minority investors.

The results show that neither full deregulation nor strict regulation across the board leads to better outcomes. What matters is how different regulations work together. In successful countries, the rules formed coherent bundles that either made it easier for scaleups to access resources or gave entrepreneurs more freedom to act, but not both at the same time.

They identified three different combinations of rules that led to higher numbers of scaleups. Each included either robust debt laws or strong minority investor protections.

“Countries often focus on improving all parts of the regulatory environment at once,” said co-author Professor Veroniek Collewaert of Vlerick Business School and KU Leuven. “But our findings show that just one strong channel of financial access can make a big difference—whether that’s through encouraging banks to lend or giving investors the confidence to provide capital.”

The study also challenges the idea that venture capital is the only funding route for high-growth firms. Many fast-growing companies in Europe rely on debt financing, and the results suggest that well-designed debt financing laws can be just as effective as investor protections in supporting firm growth.

The findings provide practical insights for policymakers aiming to support entrepreneurship. Rather than trying to balance all regulations, governments may be better off strengthening one financial pillar to ensure scaleups can access the funding they need to scale.

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For more information or to speak with the researchers, please contact Alex Lopez at alex@bluesky-pr.com or on +44 (0)1582 797959.