Corruption and Total Entrepreneurship Activity

Abstract

Corruption is an important social phenomenon that affects entrepreneurship and, thus, the level of development of the whole economy. The aim of this article is to present the heterogeneity of the impact of corruption on entrepreneurship. A research hypothesis that points to the curvilinearity of the impact of corruption on the level of early entrepreneurship was verified. The empirical study was conducted based on panel data for 21 European countries. Using three different estimators, econometric models were developed to explain the level of early entrepreneurship by the quadratic and logarithmic functions of corruption. The results confirm that corruption affects the entrepreneurship in a non-linear way, and this relationship is U-shaped. This was also the result of a similar study conducted by Anokhin and Schulze in 2009. These studies are consistent with the observed patterns in the economy, as developing countries experience far greater entrepreneurial growth as a result of the decline in corruption than economically developed countries. The results are undoubtedly the added value of this article.