Entrepreneurial activity in the EU: An empirical evaluation of its determinants

Abstract

Entrepreneurship plays a major role in national economies, being considered one of the main engines of economic growth, and an important contributor to creating new jobs and innovations. Identifying the main determinants of entrepreneurial activity is important for helping the decision makers in adopting adequate measures to support the creation and development of new businesses. The turbulent economic environment in recent years dominated by economic and financial crises, resulting in a reduction in economic growth but also in an increase in unemployment, has led decision makers to turn their attention again to the determinant factors of entrepreneurship. Starting from those stated above, through this paper we aim to investigate the impact of some macroeconomic, individual and business environment-related factors on the dynamics of entrepreneurial activity in 18 European Union (EU) countries for a period of 14 years (2002-2015). We use three regression models and we apply panel data fixed effect model approach. The results of our study highlight that inflation rate, foreign direct investments, access to finance and total tax rate are the main macroeconomic determinants of entrepreneurship. Also, we find that all individual business-related factors considered in the analysis have a significant impact on total entrepreneurship rate.