A theoretical grounding and test of the GEM model

Abstract

The Global Entrepreneurship Monitor model combines insights on the allocation of effort into entrepreneurship at the national (adult working-age population) level with literature in the Austrian tradition. The model suggests that the relationship between national-level new business activity and the institutional environment, or Entrepreneurial Framework Conditions, is mediated by opportunity perception and the perception of start-up skills in the population. We provide a theory-grounded examination of this model and test the effect of one EFC, education and training for entrepreneurship, on the allocation of effort into new business activity. We find that in high-income countries, opportunity perception mediates fully the relationship between the level of post-secondary entrepreneurship education and training in a country and its rate of new business activity, including high-growth expectation new business activity. The mediating effect of skills perception is weaker. This result accords with the Kirznerian concept of alertness to opportunity stimulating action.