Multiple measures of US entrepreneurial activity and classical liberal institutions

The purpose of this paper is to provide a robustness check of the relationship between entrepreneurial activity and economic freedom. As a deliberate “robustness check,” the authors estimated various spatial measures of entrepreneurship found in the research literature, using the same estimator within a consistent model that included political institutions, proxied by the Economic Freedom of North America index. Like many exemplars in the literature, the authors’ focus was on the US states.

The authors estimated models of five different measures of entrepreneurial activity in a model based on Reynolds, Storey, and Westhead (1994).

The authors failed to replicate many of the results found in the literature. The various measures of entrepreneurship were related to different independent variables. Economic freedom was not a consistently significant predictor of entrepreneurial activity.

The empirical work focuses on the US states, and may not be generalizable. By deliberate choice, the authors did not include many of the independent variables, data corrections, or estimation techniques found in the literature. The results imply the need for additional development in the theory that relates institutions to entrepreneurial activity.

To the best of the authors’ knowledge, no one else has “raced,” side‐by‐side, various entrepreneurship measures in a model that includes institutions.