The Dynamics between Structural Conditions and Entrepreneurship in Europe: Feature Extraction and System GMM Approaches

Abstract

Structural conditions and population characteristics of countries have been identified in the literature as factors for an individual to become, or to have intentions of becoming, an entrepreneur. However, this is still a subject under research, which has become increasingly relevant and could be crucial in the current challenges of European countries. In this work, the factors for entrepreneurial intentions and entrepreneurship activity are studied. More precisely, the structural conditions of European countries, which has changed over the last two decades, is analysed. The aim is to describe this behaviour and to state the main conditions for developing entrepreneurship activities and the intentions to become an entrepreneur. To achieve this purpose, feature extraction, namely, principal component analysis and dynamic longitudinal approaches are used. In particular, we propose that the system-generalised method of moments (GMM) model is adequate in this situation. The results suggest that the structure of the European framework conditions for entrepreneurship, obtained using the Factor Analysis year by year, is quite diversified until 2008, while after 2008, it is more stable. Moreover, it is concluded that the conditions associated with entrepreneurial intentions and entrepreneurial activity differ between these two time periods. Hence, the dynamic aspect of the structural conditions that affect entrepreneurial activities or intentions should be acknowledged.