Agency theory and entrepreneurship: A cross-country analysis

Abstract

Central to economic development is entrepreneurship. Using an agency theory lens, we seek to better understand how national policy can spur entrepreneurship. Guided by capitalist and socialist logic and ideals we investigate the direct and joint effects of market freedom and social spending national policies. In drawing from a sample of 19 countries spanning 2004–2010, we find that neither market freedom nor social spending alone positively impacts entrepreneurial activity; however, an interaction exists, as entrepreneurial activity is bolstered when enhancing market freedom and social spending complement one another. Findings suggest mixed national policies that combine market freedom and social spending are best positioned to spur entrepreneurship.