LINK BETWEEN ENTREPRENEURSHIP AND FORMAL INSTITUTIONS WITH REFERENCE TO THE LEGISLATIVE FRAMEWORK – EVIDENCE FROM META REGRESSION ANALYSIS

Abstract

Summarising the results from a sample of 71 papers and 328 regressions, this paper provides new insights into the relationship between formal institutions and entrepreneurship. The results of the meta-regression analysis show that the basic effect of institutions on entrepreneurship is positive and statistically significant but becomes progressively weaker over time. However, when the analysis focuses on newly registered enterprises and controls for endogeneity, the results indicate an exceptionally strong, positive, and statistically significant effect of institutions on entrepreneurship in the short and medium term. The effect becomes even stronger if the models are specified without interactions of institutions with other variables. In contrast, this effect is absent in the case of women's entrepreneurship. The paper highlights precisely defined conditions under which formal institutions have the greatest impact on entrepreneurship. The evidence provides policymakers with clear guidelines to help them reshape institutional frameworks to increase the level and efficiency of entrepreneurship in the economy.