Role of Public Policy and State Capacity in Influencing Entrepreneurial Activity: A Cross Country Analysis
DOI:
https://doi.org/10.69980/9zrw0g89Abstract
Entrepreneurship serves as a key catalyst of economic growth, driving innovation and creating employment opportunities across the globe. (Ács et al., 2018; Autio et al., 2014). By facilitating the creation and expansion of new ventures, entrepreneurship contributes to the dynamism and resilience of economies in an increasingly competitive and globalized environment (Sautet, 2023; Baumol, 1990). Governments and policymakers recognize entrepreneurship as a key lever for addressing structural economic challenges, including unemployment and technological disruption (Aidis et al., 2022; Bosma et al., 2024).
References
1. Acemoglu, D., & Robinson, J. A. (2019). The narrow corridor: States, societies, and the fate of liberty. Penguin Press.
2. Acs, Z. J., Audretsch, D. B., Braunerhjelm, P., & Carlsson, B. (2009). The knowledge spillover theory of entrepreneurship. Small Business Economics, 32(1), 15–30.
3. Acs, Z. J., Autio, E., & Szerb, L. (2014). National systems of entrepreneurship: Measurement issues and policy implications. Research Policy, 43(3), 476–494. https://doi.org/10.1016/j.respol.2013.08.016
4. Ács, Z. J., Autio, E., & Szerb, L. (2018). National systems of entrepreneurship: Measurement issues and policy implications. Research Policy, 47(1), 12–25. https://doi.org/10.1016/j.respol.2017.10.006
5. Aidis, R., Estrin, S., & Mickiewicz, T. (2022). Entrepreneurship policy: What it is and why it matters. Journal of Economic Perspectives, 36(3), 123–148. https://doi.org/10.1257/jep.36.3.123
6. Amorós, J. E., Etchebarne, M. S., & Ibarra, D. C. (2023). Entrepreneurial ecosystems and institutional conditions: The role of expert-based national assessments. Small Business Economics, 60(2), 595–614. https://doi.org/10.1007/ s11187-023-00718-w
7. Amorós, J. E., Etchebarne, M. S., Ibañez, A., & Romaní, G. (2023). Global Entrepreneurship Monitor 2022/2023 Global Report: Adapting to a New Normal. Global Entrepreneurship Research Association. https://www.gemconsortium.org/report
8. Ang, Y. Y. (2020). State capacity and development: An institutionalist perspective. Cambridge University Press.
9. Audretsch, D. B., & Belitski, M. (2021). The role of R&D and knowledge spillovers in innovation and productivity. European Economic Review, 139, 103860. https://doi.org/10.1016/j.euroecorev.2021.103860
10. Autio, E., Nambisan, S., Thomas, L. D., & Wright, M. (2014). Digital affordances, spatial affordances, and the genesis of entrepreneurial ecosystems. Strategic Entrepreneurship Journal, 11(1), 72–95. https://doi.org/ 10.1002/sej.1266
11. Baumol, W. J. (1990). Entrepreneurship: Productive, unproductive, and destructive. Journal of Political Economy, 98(5), 893–921. https://doi.org/10.1086/261712
12. Besley, T., & Persson, T. (2011). The logic of political violence. The Quarterly Journal of Economics, 126(3), 1411–1445. https://doi.org/10.1093/qje/qjr022
13. Bjørnskov, C., & Foss, N. J. (2016). Institutions, entrepreneurship, and economic growth: What do we know? Small Business Economics, 46(4), 567–576. https://doi.org/10.1007/s11187-016-9716-6
14. Block, J. H., Fisch, C. O., Hahn, A., & Sandner, P. G. (2023). How do digital business models affect funding success? Evidence from venture capital investments in platform startups. Journal of Business Venturing, 38(1), 106278. https://doi.org/10.1016/j.jbusvent.2022.106278
15. Block, J., Fisch, C. O., & van Praag, M. (2021). The Schumpeterian entrepreneur: A review of the empirical evidence on the antecedents, behavior, and consequences of innovative entrepreneurship. Small Business Economics, 57, 1691–1727. https://doi.org/10.1007/s11187-020-00351-5
16. Bosma, N., Hill, S., Kelley, D., Levie, J., & Tarnawa, A. (2024). GEM 2023/2024 Global Report: Adapting to a New Normal. Global Entrepreneurship Research Association. https://www.gemconsortium.org/report/gem-20232024-global-report
17. Bosma, N., Stam, E., & Wennekers, S. (2024). Public policy and entrepreneurship: Evidence from the Global Entrepreneurship Monitor. Small Business Economics, 62(2), 345–362.
18. Breschi, S., & Lassébie, J. (2023). The institutional context of startup creation: Regulatory complexity and entrepreneurial activity. Journal of Business Venturing, 38(1), 106340. https://doi.org/10.1016 /j.jbusvent.2022.106340
19. Bruton, G. D., Ahlstrom, D., & Li, H.-L. (2010). Institutional theory and entrepreneurship: Where are we now and where do we need to move in the future? Entrepreneurship Theory and Practice, 34(3), 421–440. https://doi.org/10.1111/j.1540-6520.2010.00390.x
20. Crunchbase. (2025). Company data. Retrieved May 18, 2025, from https://www.crunchbase.com
21. Fatoki, O. (2024). Governance, policy and startup success: Empirical evidence from emerging markets. Journal of Small Business Management, 62(1), 1–21. https://doi.org/10.1080/00472778.2023.2199831
22. Fuentelsaz, L., González, C., & Maícas, J. P. (2021). The impact of formal and informal institutions on opportunity and necessity entrepreneurship. BRQ Business Research Quarterly, 24(4), 267–282. https://doi.org/10.1177 /23409444211019836
23. Fukuyama, F. (2013). What is governance? Governance, 26(3), 347–368. https://doi.org/10.1111/gove.12035
24. GEM (Global Entrepreneurship Monitor). (2025). GEM 2024/2025 Global Report: Entrepreneurship Reality Check. Global Entrepreneurship Research Association. https://www.gemconsortium.org/report/gem-20242025-global-report-entrepreneurship-reality-check-4
25. Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2010). Multivariate Data Analysis (7th ed.). Pearson Education.
26. Henrekson, M., & Sanandaji, T. (2020). Small business activity does not measure entrepreneurship. Proceedings of the National Academy of Sciences, 117(32), 19151–19158. https://doi.org/10.1073/pnas.1920543117
27. Hochberg, Y. V., Ljungqvist, A., & Lu, Y. (2023). Whom you know matters: Venture capital networks and investment performance. The Journal of Finance, 78(1), 123–165. https://doi.org/10.1111/jofi.13197
28. International Labour Organization. (2025, January 7). Unemployment, total (% of total labor force) (modeled ILO estimate). ILOSTAT. https://ilostat.ilo.org/data
29. International Monetary Fund. (2024). World Economic Outlook Database, October 2024. https://www.imf.org/en/Publications/WEO/weo-database/2024
30. Kaufmann, D., Kraay, A., & Mastruzzi, M. (2010). The worldwide governance indicators: Methodology and analytical issues. World Bank Policy Research Working Paper, No. 5430.
31. Khan, M. A., Ahmed, S., & Rahman, T. (2023). Institutional quality and entrepreneurship: The moderating role of state capacity. Journal of Business Venturing Insights, 19, e00305. https://doi.org/10.1016 /j.jbvi.2023.e00305
32. Li, X., Chen, Y., & Wang, H. (2024). Public policy effectiveness and entrepreneurial activity: The moderating impact of institutional capacity. International Journal of Entrepreneurial Behavior & Research, 30(2), 289–307. https://doi.org/10.1108/IJEBR-12-2023-0698
33. Mazzucato, M., & Kattel, R. (2021). COVID-19 and public-sector capacity. Oxford Review of Economic Policy, 36(Supplement_1), S256–S269. https://doi.org/10.1093/oxrep/graa022
34. Mechkova, V., & Lindberg, S. I. (2022). Political corruption and state capacity: An integrated framework. Governance, 35(2), 365–386. https://doi.org/10.1111/gove.12653
35. North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge University Press.
36. Sautet, F. (2023). Public policy and entrepreneurship: A complex relationship. Journal of Entrepreneurship and Public Policy, 12(1), 1–15. https://doi.org/10.1108/JEPP-12-2022-0036
37. Stenholm, P., Acs, Z. J., & Wuebker, R. (2013). Exploring country-level institutional arrangements on the rate and type of entrepreneurial activity. Journal of Business Venturing, 28(1), 176–193. https://doi.org/10.1016 /j.jbusvent.2011.11.002
38. United Nations. (2024). World Population Prospects 2024: Summary of Results. Department of Economic and Social Affairs, Population Division. https://population.un.org /wpp/
39. Valliere, D. (2020). Economic freedom and the odds of entrepreneurial success. Small Business Economics, 54, 1171–1191. https://doi.org/10.1007/s11187-018-0108-4
40. Williams, N., & Krasniqi, B. A. (2018). Coming out of conflict: How migrant entrepreneurs utilise human and social capital. Journal of International Entrepreneurship, 16(2), 301–323. https://doi.org/10.1007/s10843-017-0219-1
41. World Bank. (2023). Worldwide Governance Indicators (WGI), 2023 update. https://databank.worldbank.org /source/worldwide-governance-indicators
42. Aparicio, S., Urbano, D., & Audretsch, D. (2016). Institutional factors, opportunity entrepreneurship and economic growth: Panel data evidence. Technological Forecasting and Social Change, 102, 45–61. https://doi.org/10.1016/j.techfore.2015.04.006
43. Gökce, F. (2023). The importance of state capacity in the fight against corruption. ResearchGate Working Paper. https://www.researchgate.net/publication/370761144
44. Karra, R., & Tran, V. (2024). State capacity and the emergence of high-impact entrepreneurship: A multilevel institutional analysis. Entrepreneurship Theory and Practice, Advance online publication.
45. Laskovaia, A., Marino, L., & Shirokova, G. (2022). Institutional context and innovation orientation of SMEs: Cross-country evidence. Small Business Economics, 59(1), 195–215. https://doi.org/10.1007/s11187-021-00452-z
46. Lin, L., & Milhaupt, C. J. (2023). The role of state legitimacy and learning capacity in entrepreneurial governance: Evidence from China. China Perspectives, 2023(1), 43–55. https://journals.openedition.org/ chinaperspectives /255
47. Yu, W., Zheng, Q., & Wang, S. (2023). Governance quality, institutional distance, and entrepreneurship: Evidence from 80 countries. Journal of Business Research, 161, 113822. https://doi.org/10.1016/j.jbusres.2023.113822
48. Kaufmann, D., Kraay, A., & Mastruzzi, M. (2011). The Worldwide Governance Indicators: Methodology and Analytical Issues. Hague Journal on the Rule of Law, 3(2), 220–246. https://doi.org/10.1017 /S1876404511200046
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Saurabh Srivastava, Dr. Tuheena Mukherjee (Author)

This work is licensed under a Creative Commons Attribution 4.0 International License.



