Public Policy and Entrepreneurial Activity: Do We Have a Winning Tandem? Channels and Conduits

Abstract

Aim: This chapter aims to examine the connection between government policies and entrepreneurial dimensions present in 13 European Union member countries, over the period 2002–2019. As long as the policies represent a set of decisions and actions issued by state-run structures, bodies with political, legislative, and financial authority to act to deal with a matter of public interest, this study overviews how intervention channels and policy instruments act upon supporting entrepreneurship.

Method: The methodology employed consists of correlations, principal component analysis (PCA), and regression models, in order to emphasise the statistically significant relationships between governance indicators and several entrepreneurial dimensions (financing for entrepreneurs, taxes and bureaucracy, basic school entrepreneurial education and training), and also the robustness of the results.

Results and Discussion: After observing the correlations evidencing strong relationships between the governance indicators, the results from PCA returned two main components for the Worldwide Governance Indicators: one incorporates the direct effect of control of corruption, government effectiveness, voice and accountability, regulatory quality, and rule of law, while the second component is based on political stability and absence of violence/terrorism factor. Results proved that governance has a significant impact on the financing available for entrepreneurs, especially from the first principal component, while taxes and regulations applied to new businesses have more impact in supporting entrepreneurship in countries with lower political stability levels. The consistent regression results emphasised that entrepreneurs feel more support from an institutional environment and more financing opportunities in an economy characterised by good governance, and taxes and regulations applied to new businesses have more impact in supporting entrepreneurship in countries with lower political stability levels.

Originality/Value: This study contributes to the literature studying the role of government policies on economic growth, by bringing more insights on the governance aspects and policies which are more favourable to productive entrepreneurship.

Citation

Vătavu, S., Teodorescu, D.-I., Nicolescu, A.-C., Costea, F. and Lobonţ, O.-R. (2022), "Public Policy and Entrepreneurial Activity: Do We Have a Winning Tandem? Channels and Conduits", Grima, S., Özen, E. and Romānova, I. (Ed.) Managing Risk and Decision Making in Times of Economic Distress, Part B (Contemporary Studies in Economic and Financial Analysis, Vol. 108B), Emerald Publishing Limited, Leeds, pp. 61-74. https://doi.org/10.1108/S1569-37592022000108B033