Quality of Governance and Welfare Generosity as Institutional Predictors of Entrepreneurship: European Perspective

Abstract

The aim of this article is to examine whether the cross-country and gender variations of entrepreneurship can be explained within the institutional framework. The study addresses normative forces to which entrepreneurs are expected to adapt within European welfare states. The normative forces are focused on norm-based factors of governmental quality and value-based factors of governmental generosity, which are both hypothesized to be associated with entrepreneurship at the level of society and furthermore from the gender perspective. To verify our hypotheses, the research was conducted among 28 European countries in the years 2012 to 2018. We adopted the macro-level of analysis and undertook panel data analysis (PDA). We estimated the econometric models with entrepreneurship rates as dependent variables and those with norm-based and value-based factors as independent variables. The results confirm that norm-based factors are associated with entrepreneurship and there are significant differences in the responses of female and male entrepreneurial activities to the quality of government. However, we did not find supporting evidence for the statistically significant impact of governmental generosity on entrepreneurship. The novelty of our research is in implementing institutional theory into the discussion on entrepreneurship from the welfare state perspective, by introducing the concept of norm-based and value-based factors which reflect the quality and generosity of the government. We also distinguish between the impact of governmental quality and generosity on entrepreneurship from the gender perspective to contribute to the discussion on the gender gap in entrepreneurship.