Macroeconomic and institutional drivers of entrepreneurial activity. A cross-country empirical assessment

Abstract

Our paper aims to investigate how the changes in macroeconomic conditions and the quality of institutions affect the level of entrepreneurial activity in 18 European Union countries, over the period 2002–2016. Using panel-data estimation techniques, we alternatively analyzed the effects of some macroeconomic and institutional framework related factors (in particular, the quality of institutions) on entrepreneurial activity level, proxied by the total early-stage entrepreneurial activity rate, nascent entrepreneurship rate, and new business ownership rate. The results of our empirical analysis show that the economic situation of EU countries and the quality of institutions (reflected in our study through competitiveness, economic freedom, and governance quality) have a significant effect on early-stage entrepreneurs and for some variables the sign of the relationship depends on the age of the business. Our findings may be of interest to policy makers in developing effective policies contributing to enhancing the entrepreneurial capacity in different countries.