Institutional variables, entrepreneurial activity and economic development

The aim of this study is to analyze the impact of institutions on entrepreneurship in groups of countries classified according to their economic development.

Data used come from the Global Entrepreneurship Monitor, the Economic Freedom in the World Index; and from the Global Competitiveness Report.

The results provide useful information for the public and private sectors as evidence that some institutional variables that influence business creation depend on the development stage and report critical aspects to progress in each type of country in order to foster entrepreneurship. In developing nations the “size of the business sector” and “health and primary education” are critical variables, while for transition economies they stack the “integrity of the legal system” and “fulfilling contracts” and for developed economies the “size of the government” and “credit available to the private sector”.

This study constitutes an unusual approach because the literature on the impact of institutions on entrepreneurship is very scarce.