Economic Freedom and the Motivation to Engage in Entrepreneurial Action

Abstract

Using institutional theory, the Heritage Foundation/Wall Street Journal 2003 Index of Economic Freedom, and the 2002 Global EntrepreneurshipMonitor, we regress opportunitymotivated entrepreneurial activity (OME) and necessity-motivated entrepreneurial activity (NME) on 10 factors of economic freedom and gross domestic product (GDP) per capita for 37 nations. We find that both OME and NME are negatively associated with GDP per capita and positively associated with labor freedom, but that various other factors of economic freedom are uniquely related to either OME or NME. Specifically, we find that OME, but not NME, is positively associated with property rights, while NME, but not OME, is positively associated with fiscal freedom and monetary freedom. Thus, governmental restrictions of economic freedom appear to impact entrepreneurial activity differently depending on the particular freedom restricted by government and the entrepreneur's motive for engaging in entrepreneurial action.

Foreign direct investment, institutional quality, economic freedom and entrepreneurship in emerging markets

“…In economies where there are high taxes, the levies can be seen as a deterrent to investor and entrepreneurial participation within the marketplace. The findings in McMullen et al (2008) indicate tax hikes have a direct impact upon entrepreneurial activity, as potential entrepreneurs weigh the risks they will assume in setting up a business and regard this as a further impediment.…”

“…These indicators are designed so that together they measure the main aspects of a free market in a country by reference to how the players respond to changing market conditions. Other studies that used this methodology using IEF indicators are (Claessens and Laeven, 2003;Klapper et al, 2006;McMullen et al, 2008;Aidis et al, 2010;Doucouliagos and Ulubasoglu, 2006;Heckelman, 2000;Han and Sturm, 2000).…”

The influence of socio-cultural environments on the performance of nascent entrepreneurs: Community culture, motivation, self-efficacy and start-up success

“…Similarly cross-national studies on, for instance, the consequences of specific regulation supporting entrepreneurship and the ease of doing business for entrepreneurship rates yield mixed results (e.g., Bowen and DeClercq, 2008;Van Stel, Storey and Thurik, 2007). In contrast, it seems that it is the fundamental institutional quality characterized by assurance of individual property rights and strong independent courts which is most consequential for entrepreneurship and which is arguably of similar quality across a nation such as the USA (e.g., Mickiewicz, 2008, 2010;McMullen, Bagby and Palich, 2008;also North, 2005).…”

Endings and Visions of New Beginnings: The Effects of Source of Unemployment and Duration of Unemployment on Entrepreneurial Intent

“…This approach would allow laid-off individuals, especially those located in communities affected by mass layoffs (Johnstone and Lionais 2004;von Wachter 2010), to parlay developing entrepreneurial intent into actual business founding. In other words, employment service agencies could help laid-off individuals build on their cognitions about entrepreneurship to produce new businesses that might resist the high failure rate traditionally associated with necessity entrepreneurship (McMullen et al, 2008). Training of the sort we are advocating might also overcome the fear of failure that seems to dampen entrepreneurial intent among those who have suffered a layoff.…”