Using QCA to explain business demography in the European Union

Abstract

Entrepreneurship is currently considered one of the major foundations of economic growth. There is a strong tendency to understand entrepreneurship as technology, self-employment, new ideas, innovation, or wealth creation. We can thus expect more developed countries to show higher growth rates, given the importance of firms' development for economic and social growth. For this reason, it is important to determine the conditions that have the greatest influence on entrepreneurship dynamics at the macroeconomic level. Using firm birth and death rates (related to business dynamics and entrepreneurship), we focus on the European Union and use qualitative comparative analysis techniques to determine the necessary and sufficient conditions for business dynamics. After dividing the whole EU sample into cohesion and non-cohesion countries, we find that entrepreneurship in cohesion countries is driven by necessity, while in non-cohesion countries, it is driven by opportunity.