Freedom and entrepreneurship: a spatial econometric approach
| Published date | 07 November 2016 |
| Date | 07 November 2016 |
| DOI | https://doi.org/10.1108/JEPP-12-2015-0038 |
| Pages | 404-411 |
| Author | Joshua C. Hall,Donald J. Lacombe,Shree B. Pokharel |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
Freedom and entrepreneurship:
a spatial econometric approach
Joshua C. Hall, Donald J. Lacombe and Shree B. Pokharel
Department of Economics, West Virginia University,
Morgantown, West Virginia, USA
Abstract
Purpose –While many studies find a positive relationship between economic freedom and
entrepreneurship, very few of these studies account for possible spatial autocorrelation. Moreover, the
development of an overall freedom measure has allowed researchers to test the relationship between
overall freedom (personal plus economic) and entrepreneurship. The literature, however, does not
account for spatial dependence in entrepreneurial activity. The purpose of this paper is to test for
possible spatial dependence in entrepreneurial activity.
Design/methodology/approach –The authors employ a spatial autoregressive model to account
for possible spatial dependence in entrepreneurial activity across states. The authors have data for
entrepreneurial activity and overall freedom for a cross-section of data on the 48 contiguous US states
for 2009.
Findings –The authors find no evidence of spatial dependence in entrepreneurial activity.
Research limitations/implications –The authors are limited to a cross-section. Combined with the
spatial lag of the dependent variable, the authors might have too few observations to find statistical
significance on either the spatial lag or other explanatory variables.
Practical implications –Future researchshould continue to account for possible spatialdependence.
Social implications –Entrepreneurship is key to economic growth. Freedom has been shown to lead
to more entrepreneurship at the state level in other research.
Originality/value –This brief research note is the first paper to account for spatial dependence in the
relationship between overall freedom and entrepreneurial activity.
Keywords Entrepreneurs, Freedom, Spatial dependence
Paper type Technical paper
1. Introduction
There exists a well-established literature among economists that economic freedom
positively affects economic growth (North, 1990; Easton and Walker, 1997; Compton
et al., 2011; Wiseman and Young, 2013; Cebula et al., 2016). The same is true for the
relationship between entrepreneurship and economic growth (Baumol, 1990; Hall and
Sobel, 2008; Hafer, 2013). As Sobel (2008) points out, the institutions of economic
freedom affect the extent to which entrepreneurial energies are transformed into
positive sum entrepreneurial outcomes such as self-employment. It is this positive sum
entrepreneurship that ultimately affects growth.
There is a large body of literature on the relationship between economic freedom
and entrepreneurship. At the national level, Castaño et al. (2015) find the economic
freedom positively affects entrepreneurship for a sample of European, Latin American,
and Caribbean countries. McMullen et al. (2008) disaggregate economic freedom and
conclude that different measures of economic freedom affect entrepreneurial activ ity in
different ways. For example, labor market freedom is positively associated with
both opportunity-motivated entrepreneurial activity and necessity-motivated
entrepreneurial activity. Bjørnskov and Foss (2008) and Nyström (2008) both use the
Economic Freedom of the World index of Gwartney et al. (2015) as their institutional
Journal of Entrepreneurship and
Public Policy
Vol. 5 No. 3, 2016
pp. 404-411
©Emerald Group Publishing Limited
2045-2101
DOI 10.1108/JEPP-12-2015-0038
Received 18 December 2015
Revised 6 July 2016
Accepted 14 July 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
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JEPP
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