What shapes entrepreneurial activity in the European Union?

PURPOSE: The aim of the article is to identify the factors influencing entrepreneurial activity in the European Union (EU) countries. In addition, to achieve the research goal, the authors provide answers to two research questions: (RQ1) What sets and types of variables influence entrepreneurial activity in the EU Member States? and (RQ2) Based on the defined factors influencing entrepreneurial activity, is there a difference between the old and new EU Member States? METHODOLOGY: Using panel regression analysis on the data from the 2009-2018 period, the article attempts to identify factors influencing entrepreneurial activity among EU countries. Furthermore, an examination of possible differences in entrepreneurial activity between the old and new EU Member States is conducted. By using variables that statistically significantly explain entrepreneurial activity, a heatmap was created. This made it possible to visualise differences between countries within each variable, as well as the impact of each variable on the analysed group of old and new EU Member States. FINDINGS: Our research indicates that entrepreneurial activity is higher in new EU Member States than in older ones, influenced by factors categorized into Human Capital and Institutional Conditions. Regarding Human Capital, higher entrepreneurial activity is associated with lower employment in the high-tech sector, higher HDI, greater participation in non-formal education, and a larger share of periodically employed individuals. Conversely, lower entrepreneurial activity correlates with a higher proportion of young people not in employment, education, or training and emigration. Notably, advanced digital skills impact on entrepreneurial activity, but their absence does not constitute a barrier to business creation. Among the Institutional variables, higher entrepreneurial activity is linked to tax burden, EU membership duration, and eurozone membership length. However, the Business Freedom indicator does not significantly affect entrepreneurial activity. IMPLICATIONS: Considering the EU’s strategy and the importance of entrepreneurial activity across EU Member States, policy implications emphasize the need for tailored policies that support business activity, aiming to minimize inter-country differences and boost economic growth. ORIGINALITY AND VALUE: Unlike prior studies that mainly compare entrepreneurship between broad economic regions, our research uniquely distinguishes between new and old EU Member States, revealing significant disparities in entrepreneurial activity and its determinants.