The Impact Of The Economic Environment On Entrepreneurship: Evidence From European Countries

The significant importance of entrepreneurship for the economic development, job creation and innovation have increased the concerns of researchers and decision makers at different levels for the understanding and investigation of the factors that could have an impact on the level of entrepreneurial activity. Our study aims to empirically investigate the impact of some main macroeconomic and business environment factors on the level of the entrepreneurial activity in 18 EU member states in the period from 2002 - 2014. Our research is based on the data provided by the Global Entrepreneurship Monitor (GEM) and by the World Bank and uses panel data estimation techniques. We took into consideration, as dependent variable for an econometric model, three indicators that are used as proxy variables of the level of entrepreneurial activity, namely: Total Entrepreneurial Activity rate, Nascent entrepreneurship rate, and New business ownership rate. We investigated eleven macroeconomic and business environment indicators, as the explanatory variables of our models, that could influence the level of the entrepreneurial activity in European countries: GDP growth, GDP per capita, unemployment, inflation, domestic credit to private sector by banks, fear of failure, entrepreneurial intentions, perceived capabilities, cost of business start-up procedures and time required to start a business. The empirical results highlight the fact that a large part of the explicative variables are significantly affecting the entrepreneurial activity, in agreement with the results of other empirical studies. Thus, the total entrepreneurial activity is influenced by unemployment rate, total tax rate, entrepreneurial intentions, perceived capabilities, cost of business start-up procedures and domestic credit to private sector. The other two dependent variables register some differences, however, overall, our study reveals that the key determinants of the entrepreneurial activity in the European countries under investigation are represented by total tax rate, the abilities of individuals and their attitudes towards entrepreneurship, cost and time needed to establish a new business, and access to sources of financing for firms.