The relationship between political uncertainty and business creation, an established topic among political scientists and economists, has attracted broader interest in recent years due to developments in contemporary politics. This paper looks at an historical example of a prolonged period of political uncertainty, Ireland in the second half of the nineteenth century, to shed light on this relationship. We find that the period when this political uncertainty was most intense coincided with a divergence between the volume of businesses created per year in Ireland and Scotland. We dub this the ‘Wee Divergence’.
Specifically, we look at business creation in Ireland from 1860 to 1900, a period characterised by pervasive uncertainty over whether Ireland would gain some measure of independence (‘Home Rule’) or remain an integral part of the United Kingdom. The question of Home Rule came to the fore of British politics on two occasions when Irish nationalist parliamentarians, holding the balance of power in Westminster, succeeded in forcing the Prime Minister to introduce a Home Rule bill, in 1886 and 1893. Facing opposition from the Conservative party in Britain, anti-Home Rule politicians in Ireland’s northern counties, and the business elite throughout the country, both bills were eventually defeated.
Using a unique dataset compiled inter alia from British government records and digitised newspaper archives, we investigate the relationship between (1) the number of companies registered per month, (2) the number of signatories to memorandums of association of companies registered and (3) nominal capital committed to new companies, and the extent to which Home Rule was discussed in the Irish broadsheet press. Preliminary results suggest a significant and negative relationship between entrepreneurship in Ireland during this period and political uncertainty over Home Rule, potentially contributing to the Wee Divergence.