The Impact of Institutional Framework On Entrepreneurship in OECD Members Countries

Achieving high-quality institutional framework is one of the basic assumptions for achieving a higher degree of welfare state. In addition to the existence of the “game rules” in the market that is equally valuable to all economic agents, it is also a condition without which a higher degree of entrepreneurial activity in the economy cannot be achieved. The aim of this research is to examine which determinants of the institutional framework are crucial for increasing entrepreneurial activity in 24 OECD member countries in the period 2010–2018. The results of Hausman test indicate that a panel with fixed effects is a suitable method for this research. The results of the investigation suggest that Political Rights, Civil Liberties, Freedom of Expression and Belief, Functioning of Government and Rule of Law are important determinants of entrepreneurial activity in observed countries. Furthermore, policies aimed at increasing media freedom and freedom of expressing personal views increase the New business density in OECD member countries. Moreover, when making certain institutional changes, policy makers should be aware of the time gap between the moment of making a decision and its reflection in the economy. Introduction of certain institutional decision may have completely different repercussions in the economy after some period of time. Consequently, particular institutional decisions may require some changes in a longer period after their adoption.