Determinants Of Entrepreneurship: An Empirical Approach

The aim of this study is to analyse the impact of economic and institutional factors, formal and informal, in the entrepreneurial activity of nations, particularly in Total Entrepreneurial Activity (TEA) within the institutional theory of North. In order to evaluate the simultaneous influence of economic and institutional factors on the entrepreneurial activity, a multiple regression approach was used with cross-country data sets (samples of 52 and 36 countries, respectively). The stepwise backward mode of estimation was implemented in the empirical analysis in order to achieve robust results. The regression results showed that TEA was negatively related to infrastructural capacity and political stability, and positively related to government spending and to freedom of expression/freedom of association (Voice and Accountability) at a country level. The empirical analysis has also tested the non linear relationship between TEA and GDP per capita. The results support the convex relationship between the two variables providing evidence that entrepreneurial activity is mostly necessity driven rather than motivated by opportunity. In this context, efforts should be made at a country´s level to develop policies that motivate entrepreneurial activities that lead to innovation.