Regional early-stage entrepreneurship in the European Union

Abstract

Purpose: Entrepreneurship is often viewed as a driver of the global economy. However, previous research on the relationship between entrepreneurship and economic growth shows contradictory results depending on the research settings. The purpose of this paper is to investigate how early-stage entrepreneurship - including only enterprises that are less than three and a half years old - affects regional economic growth in the European Union. Methodology: The methodology includes three methods: bivariate correlation, fixed effects regression with region and time fixed effects and spatial fixed effects regression. The panel sample consists of 273 NUTS 2 regions between 2008 and 2017. Results: The results support the hypothesis of this research and show that early-stage entrepreneurship has a mild positive effect on the economic growth of European regions. However, the potential bidirectional nature of this relationship obliterates the ability to comment on the causality of this link. The percentage of people in the active population employed in human resources in science and technology and gross fixed capital formation have a significant and impactful effect on regional GDP. Conclusion: The conclusion can be drawn that the effect of early-stage entrepreneurship on regional economic growth is conditioned by the population density of the region. Although these results show that enterprises founded in densely populated areas such as cities and metropolitan areas tend to have a larger effect on the regional economy, the results are ambiguous.