Do social and economic factors affect the technical efficiency in entrepreneurship activities? Evidence from European countries using a two-stage DEA model

Abstract

This article aims is to address whether, and to what extent, socioeconomic conditions influence entrepreneurship-based activities in 18 European countries grouped into subregions (North, South, East and West) during the period 2008–2018. We conducted the empirical study under a two-stage DEA model. The results of scores of technical efficiency of the first stage of DEA show inefficiency in Northern Europe for Finland, Ireland and Sweden, while, Belgium, Germany, France and Luxembourg are also inefficient countries in Western Europe. Finally, Spain and Italy are inefficient in Southern European group of countries. In the second stage of DEA, through the parametric fractional regression model (FRM), which consolidated results of one-part and two-part models, the results show that the Expenditure on Social Protection produces positive (high magnitude coefficient) statistical significance on TEA of Eastern, Western and Southern EU countries, while generates a negative (high magnitude coefficient) statistical significance on TEA of Northern EU countries. Moreover, in the Eastern, Western and Southern EU countries, in contrast with Northern EU countries, presumably the dimensions of the social welfare (employment/unemployment protection and so on) are used to encourage individuals to invest in specific skills and/or new businesses. Furthermore, the results in this second stage of DEA helps gain a thorough perspective on how economic and social impacts result from TEA efficiency.