Government expenditure and entrepreneurial activity: considering the types of entrepreneurial motivations

Abstract

ABSTRACT As a cross-national study, we analyze the relationship between the functional-level government expenditure and the different types of entrepreneurship, that is, whether it is an opportunity- or necessity-based entrepreneurship. Our analysis of 17 Organization for Economic Cooperation and Development (OECD) nations revealed that government investments in economic affairs are positively related to opportunity-driven entrepreneurship, but negatively to necessity-driven entrepreneurship. On the other hand, government spending on education is positively related to necessity-driven entrepreneurship. Further, we find that larger government expenditure on education in Asian countries encourages more entrepreneurs to start their businesses than the rest of the OECD.