Socio-economic causals for entrepreneurial transformation

Entrepreneurship has become vital for national growth. Therefore, it is essential to explore the factors that enhance entrepreneurial transformation. The literature identifies two main driving forces behind entrepreneurship: necessity and opportunity, which react differently to the socio-economic factors. This study explores the socio-economic determinants of necessity-based entrepreneurship and opportunity-based entrepreneurship. Here the yearly data of 108 countries from 2009 to 2017 is used to formulate a panel data model. Data on entrepreneurship is taken from the Global Entrepreneurship Monitor (GEM). HDI is used as a surrogate measure of socio-economic factors along with several control variables like cost of doing business, economic factors, governance factors and perception factors. Panel Feasible Generalized Least Squares (FGLS) estimation technique accounts for spatial heterogeneity. The panel data estimation shows that human capital improvement enhances the opportunities for entrepreneurial transformation while decreasing necessity-based entrepreneurship due to higher job creation. The findings also suggest that improvement in governance, perceived opportunities, openness, and culture are vital for enhancing opportunity-driven entrepreneurship.