Determinants of Entrepreneurship in Europe

Abstract

This paper uses an Eclectic Framework explaining entrepreneurship incorporating different streams of literature and spanning different disciplines. The Eclectic Framework integrates factors shaping the demand for entrepreneurship on the one hand, with those influencing the supply of entrepreneurs on the other hand. It also creates insight into the role of public policy identifying the channels through which the demand or the supply of entrepreneurship can be shifted. In its empirical part the present paper estimates a multinomial logit using survey data from the 15 EU member states, Norway, Iceland, Liechtenstein and the US to establish the effect of demographic and other variables on various entrepreneurial engagement levels. Data of two Entrepreneurship Flash Eurobarometer surveys (2003 and 2004) containing over 20,000 observations are used. Other than demographic variables, the set of explanatory variables used includes the perception by respondents of administrative complexities, of availability of financial support, a rough measure of risk tolerance, the respondents’ preference for self-employment and country specific effects. The most striking result is that the perception of lack of financial support has no discriminative effect across the various levels of entrepreneurial engagement.

Keywords: entrepreneurship, determinants, nascent entrepreneurship, multinomial logit, barriers to entry

JEL Classification: M, M13, O32