Determinants of Cross-National Entrepreneurial Activity

This paper investigates factors that affect the decision to engage in entrepreneurial activity using cross-national unbalanced panel data from 2002 to 2010 for forty-eight high-income countries, In a random effects model with clustered standard errors, a one percentage-point increase in the percentage of the population engaged in venture capital is associated with a 0.753 percentage-point increase in entrepreneurial activity. A one standard-deviation increase in the social desirability index is associated with a 0.149 percentage-point increase in total entrepreneurial activity. Both effects are statistically significant at the 0.01 level. While regulatory constraints have a statistically insignificant impact on total early-stage entrepreneurial activity, they have a negative and statistically significant impact on formal sector entrepreneurial activity.