Do Entrepreneurship And Business Formation Generate Economic Growth? A Regional Analysis For Romania

Entrepreneurship has become a key driver of regional economic change. Entrepreneurs, and implicitly the businesses they set up and run, become essential actors for economic development, exploitation of opportunities, innovation and the efficient use of resources. Scholars and decision makers recognize entrepreneurship’s contribution in jobs creation, prosperity and economic dynamism, in improving the local and regional economic environment, making it more permeable to innovation, change and initiative. In different words, entrepreneurship and business formation are called upon to contribute to reducing regional disparities, either in a 'classic' manner, i.e. by increasing investments and employment in lagging regions, or by new approaches, rising territorial competitiveness in all regions and hence stimulating economic growth. In this paper we analyse the impact of the number of registered and discontinued companies, but also of the active population, on the economic growth, at the level of the 8 development regions of Romania. We investigate the 2004 – 2016 time period, by using the Panel Autoregressive Distributed Lag (ARDL) method. The Pedroni Johansen cointegration shows that the variables are cointegrated. The results reveal that, on the short-run, the registered companies are one of the most important factors influencing GDP, in all 8 regions of Romania, while on the long-run, the registered companies have a small impact on GDP. Therefore, a 1% increase in the number of registered companies could lead to an increase of 0.17% of the GDP on the short-run. On the long-run, the most important driver for economic growth is the active population: a 1% increase in the active population on the long-run could lead to an increase of 7% of the GDP.