Institutions, human capital and entrepreneurship density

Abstract

This study examines the impacts of national institutions and human capital on entrepreneurship density in a global sample of 67 economies over the period 2006–2016. Furthermore, the associations between human capital and institutions on entrepreneurial activities are investigated while controlling for financial development, economic growth, trade openness, FDI inflows and total natural rents. Employing the panel corrected standard error estimator to deal with cross-sectional dependence, we find that formal institutions represented by entrepreneurship procedures and the general institutional quality are positively associated with entrepreneurship density. Also, informal institutions represented by socialist history, common law system and colonial history are positively associated with entrepreneurship density. Notably, human capital has a moderating effect in reducing the negative impacts of weak institutions.