Abstract

Theoretically, entrepreneurship has been deemed crucial to economic growth. However, the literature has failed to give governments clear guidance on policy since the empirical evidence linking entrepreneurship to economic growth has been mixed. We suggest that part of the reason for these contradictory findings could be that entrepreneurship has been mispecified in the economics literature as entry density or R&D. We propose that a more accurate characterisation of entrepreneurship at the macro-level is EO. Using a sample that covers data of 93 countries over the period 1980-2008, firstly, we employ factor analysis to confirm EO as an aggregate level, reflective, unidimensional second-order construct with three indicators that covary: risk taking, innovativeness and proactiveness. Secondly, we use system GMM analysis to investigate the determinants and drivers of EO. We find that the control of corruption, banking development and human capital influence the level of EO that countries possess. However, this impact is non-linear with