Institutional quality, unemployment, economic growth and entrepreneurial activity in developed countries: a dynamic and sustainable approach

Abstract

Purpose This paper aims to analyse the impact of institutional quality, economic factors and unemployment on entrepreneurial activity. The dynamic approach adopted in this study permits to evaluate the simultaneous influence of specific factors on total entrepreneurial activity. Design/methodology/approach A quantitative approach through a panel vector autoregression analysis was adopted to take into account possible endogeneity issues, and a short-run Granger test was used to test causality between variables to fill the theoretical and empirical gap about the joined and dynamic effect of institutional quality, economic factors and unemployment on total entrepreneurship activity as a dependent variable. Findings The use of a dynamic estimation approach demonstrates that three kinds of relative effects exist: durable and positive effects between industrial production index (IPI), stability and self-employment, a limited positive effect which exists during a predeterminant period between dimensions of institutional quality and unemployment rate (UR) and finally negative effects between IPI and UR. Research limitations/implications In general, this study identifies three main effects: negative, temporary positive and perpetual positive. This is the same conclusion for the link between self-employment rates (SER) and institutional quality, measured by six dimensions. Three of these dimensions are especially important: political stability and the absence of violence, governmental effectiveness and regulatory quality. Practical implications In light of this study’s results and contrary to the idea admitted about the negative effect of unemployment on entrepreneurial activity, it seems that a relatively positive effect exists. By relative, the author means during a determinant period. It also has to be remembered that entrepreneurial activity was appreciated by the SER according to the recommendation of many previous researchers discussed at the beginning of this paper. Based on the model, three levels of relations emerge. This permits this study to dress a hierarchical list of alternatives to promote entrepreneurial activity. Economic policymakers have to reconsider the importance of the UR as the best occasion to create firms if good institutions and economic support are provided. Good governance and stability are the most important institutional determinants with a long positive effect. This conclusion suits Glaeser and Saks (2006) as well as Ojeka et al. (2019). Social implications This research offers considerable scientific evidence to make decisions and orient decisions-makers about policies adopted to increase institutional quality, reducing unemployment and stimulate economic activity, but it is still necessary to reconsider these results for developing countries. It is hoped that future researchers enrich and reinforce the model to provide a critical pathway for successful entrepreneurship activity in this new normal. In the end, this crisis can be also treated as a good occasion to innovate and reconsider the thinking process to manage and operate in the economic world. Originality/value This study’s contribution is to help and assist economic policymakers to be aware of the relative importance of such determinants at the country level. The introduction of the relative importance of time is in agreement with the concept of entrepreneurial opportunity.

Institutions and macroeconomic indicators: entrepreneurial activities across the world

“…This evidence underscores the need for contextspecific assessments of variables related to institutional theory's cognitive-cultural, normative and regulatory dimensions in both developed and developing countries. We also acknowledge that the greater effectiveness of institutions on TEA in developed countries Institutions and entrepreneurial activities can be attributed to the quality of the institutions in these countries (Ragmoun, 2023;Audretsch et al, 2023b). Firstly, in Model 1, where we examined the impact of cognitive-cultural institutions, we found support for 3 out of 8 variables in developed countries and 2 in developing economies.…”

“…For example, Charfeddine and Zaouali (2022) conducted a panel data analysis for 2001-2018. A similar situation exists in Ragmoun's (2023) research, which involves a panel data analysis for 1996-2019. In this study, Ragmoun (2023) worked on a sample from 24 developed countries and found a significant and positive impact only for four years between unemployment rates and entrepreneurial activities.…”

“…A similar situation exists in Ragmoun's (2023) research, which involves a panel data analysis for 1996-2019. In this study, Ragmoun (2023) worked on a sample from 24 developed countries and found a significant and positive impact only for four years between unemployment rates and entrepreneurial activities. Therefore, this discrepancy could be due to the changing effects of longitudinal data over the years.…”

“…Studies have confirmed the validity of these two models (Audretsch et al ., 2001). Therefore, the nature of the relationship between unemployment and total entrepreneurship cannot be determined theoretically and becomes an empirical question with many nuances (Arin et al ., 2015; Ragmoun, 2023). For this article, we focus on the impact of unemployment on entrepreneurship and acknowledge that unemployment will negatively affect entrepreneurship in both developed and developing countries.…”

“…Second, our study addresses the limitations of prior research by offering explanations for early-stage entrepreneurial activities in developed and developing countries through a diverse array of macroeconomic indicators. In this regard, we include macroeconomic variables previously overlooked in the literature, such as gross debt stock, total exports, total imports, current account balance, gross national savings and domestic investment expenditures (Fan et al, 2023;Charfeddine and Zaouali, 2022;Junaid et al, 2022;Ragmoun, 2023). In summary, our research is the first to MD 62,4 comprehensively analyze the effects of institutional and macroeconomic indicators on entrepreneurial activities in developed and developing countries.…”