Regional integration and entrepreneurship: evidence from European Union

Abstract

Purpose The purpose of this paper is to empirically uncover the relationship between economic integration and levels of entrepreneurial activity across 24 EU countries between 2004 and 2012. The deepening of EU integration corresponds to increases in the size and competitiveness of domestic markets as member states reorient economic activity toward the larger, competitive single market. Spillovers of both economic and political dimensions of integration in the common market on micro firm and self-employment are considered. The paper contributes to the understanding of the hypothesized relationship between globalization and the rise of entrepreneurial economy. Design/methodology/approach The paper uses fixed effects linear regression models to estimate the marginal effects of economic integration on entrepreneurial activity. Several dependent variables and controls for social, economics, and institutional context are used to confirm the robustness of the results. Findings The paper finds that increased economic activity of member countries within the EU common market, as well as institutional compliance and integration in the European Monetary Union and Schengen Agreement are positively and significantly associated with the rise of entrepreneurship. Notably, it is found that a standard deviation increase in economic and political integration is associated with, respectively, 16 and 7.2 percent increase in micro firm density. Some preliminary evidence on the quality of the arising entrepreneurial activity are also given. Originality/value The paper takes stock of existing descriptive and theoretical literature on global economic integration and entrepreneurship to uncover, for the first time, the empirical relationship between entrepreneurship and levels of economic and political integration within the EU bloc.