Abstract
By using data related to the 15 European Union ?old? and ?new? Member States, for a time span between 2001 and 2014, the present paper supports the thesis of a positive and significant correlation between the quality of governance and entrepreneurial activity. In order to test such correlation, the elements of Governance Quality reported by the World Bank?s Worldwide Governance Indicators (WGI) project were considered. Some key aspects of entrepreneurial activity reflected by Total Early-Stage Entrepreneurial Activity, Perceived Opportunities and Perceived Capabilities were taken into account based on The Global Entrepreneurship Monitor (GEM) database. In addition, in order to reflect the structural rigidities and tensions from the labour market, the unemployment rate provided by the World Bank?s World Development Indicators database was considered as a control variable. The effect of the inclusion of a country in a certain development group, according to the most recent World Bank classification (?low-income economies? to ?high-income economies?), was also considered in a multi-level analytical framework with a two-level model. The results of this study clearly indicate that higher levels of public policies and institutions? credibility/effectiveness produce a positive and robust impact on entrepreneurial climate.
Highlights
Nowadays, achieving social objectives requires public authorities’ efforts, involving a complex and pragmatic decision-making process
Gupta (2007) and Gupta et al (2012) point out, the institutional environment in a country has proven to be an important foundation for exploring a wide variety of topics in entrepreneurship, since institutions, comprising of formal and informal norms, rules and values governing social and economic exchanges, have a major influence on the rate and nature of entrepreneurial activity in any society, including emerging economies
The dimensions of governance quality are described by a total of six governance dimensions in the framework proposed by Kaufmann, Kraay, and Massimo Mastruzzi (2010) and reported by the World Bank’s Worldwide Governance Indicators (WGI) project
Summary
The approach of this study is based on the neo-institutional framework, focusing both on formal legal rules and informal social norms in order to underlie economic activity and further progress. Gupta (2007) and Gupta et al (2012) point out, the institutional environment in a country has proven to be an important foundation for exploring a wide variety of topics in entrepreneurship, since institutions, comprising of formal and informal norms, rules and values governing social and economic exchanges, have a major influence on the rate and nature of entrepreneurial activity in any society, including emerging economies. The goal is to test this hypothesis in the case of the European Union’s Member States
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