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An economic view of Entrepreneurial

intention
entrepreneurial intention
Walid Adam Nakara
Montpellier Business School, Social Entrepreneurship and Inclusion Chair,
Montpellier, France 1807
Rahma Laouiti Received 19 December 2019
Laboratory Research for Economy, Management and Quantitative Finance, Revised 19 May 2020
30 June 2020
Institute of High Commercial Studies, University of Sousse, Sousse, Tunisia Accepted 8 August 2020
Roberto Chavez
Department of Business Technology and Entrepreneurship,
Swinburne University of Technology, Melbourne, Australia, and
Samiha Gharbi
RIGUEUR Laboratory, ISCAE, University of Manouba, Manouba, Tunisia

Abstract
Purpose – The role of macrolevel factors in entrepreneurial intention remains as an underexplored issue in the
literature. The purpose of this study is to reduce this gap by testing the effect of economic development on
entrepreneurial intention.
Design/methodology/approach – This study adopts a quantitative approach that formally tests for a
quadratic relationship between economic development measured by the gross domestic product (GDP) and the
Global Competitiveness Index (GCI)) and entrepreneurial intention based on longitudinal data covering 72
countries over the 2010–2016 period. Data are gathered from the Global Entrepreneurship Monitor (GEM), the
International Monetary Fund (IMF) and the World Economic Forum (WEF).
Findings – The results reveal the existence of a U-shaped relationship between the country’s GDP per capita
and individuals’ entrepreneurial intention. The results also support a similar relationship between GCI and
entrepreneurial intention. These findings suggest that individuals’ entrepreneurial intentions differ between
countries depending on the level of economic development.
Originality/value – To the authors’ knowledge, this article presents the first attempt to investigate the role of
economic development on entrepreneurial intention based on longitudinal data covering a large sample of
countries. Moreover, by providing evidence of a U-shaped relationship between economic progress and
individuals’ propensity to attempt an entrepreneurial career, this study enhances the understanding of the
macrolevel determinants of entrepreneurial intention.
Keywords Entrepreneurial intention, Economic development, U-shaped relationship, Entrepreneurship
Paper type Research paper

Introduction
Over the past several years, practitioners and researchers have recognized the considerable
variance in the level and dynamics of entrepreneurship across countries and have exerted an
important effort to identify the factors underlying this variance (Blanchflower et al., 2001;
Wennekers et al., 2005). Databases such as the Global Entrepreneurship Monitor (GEM) show
large differences in entrepreneurial activity across countries with different levels of economic
development. For instance, the GEM’s total early-stage entrepreneurial activity rate for the

JEL Classification — E24, L26, M13, O55.

International Journal of
The authors would like to thank the Editors and two anonymous reviewers for their helpful Entrepreneurial Behavior &
comments and suggestions. The authors are members of the Labex Entrepreneurship (University of Research
Vol. 26 No. 8, 2020
Montpellier, France) funded by the French government (Labex Entreprendre, ANR-10-Labex-11-01). pp. 1807-1826
Professor Walid A. Nakara also holds the Chair of Social Entrepreneurship and Inclusion at Montpellier © Emerald Publishing Limited
1355-2554
Business School. DOI 10.1108/IJEBR-12-2019-0693
IJEBR year 2014 is 13.81% in the USA, 6.60% in India and 32.79% in Botswana. Such considerable
26,8 differences raise many questions about the extent to which economic development can affect
the level of entrepreneurship.
Moreover, it is admitted that any entrepreneurial process starts with entrepreneurial
intentions (e.g. Shirokova et al., 2016). In this vein, Kautonen et al. (2015, pp. 668–669) point out
that “eighty percent of those who reported having engaged in activities aimed at starting
a business also reported a positive level of intention to do so in the previous year”. Thus, one
1808 would expect the effect of economic development on entrepreneurial dynamics to be rooted in
its effect on entrepreneurial intentions. The present study aims at contributing to the
entrepreneurship literature by focusing on the role of economic development in shaping
entrepreneurial intentions.
Uncovering the determinants of entrepreneurial intention has been a topic of research
for over three decades (e.g. Krueger et al., 2000; Schlaegel and Koenig, 2014; Şahin et al.,
2019). Studies concerned with those determinants tend to focus on the effects of
psychological and personality traits on individuals’ propensity to attempt an
entrepreneurial career (Li~ nan and Chen, 2009; Caliendo et al., 2014; Munir et al., 2019).
This paper takes a different approach by considering the role of macrolevel factors in
entrepreneurial intention. Understanding this role is important for the creation of an
environment that encourages entrepreneurial behavior.
One way of looking at individuals’ entrepreneurial intention is to perceive it as a response to
the conditions and environment around them (Krueger et al., 2000). One would expect the
environment to be affected by macrolevel factors, such as the level of economic development
(Acs and Amoros, 2008; Griffiths et al., 2009; Dheer, 2017). However, a serious effort to link
economic development to entrepreneurial intention is conspicuously underexplored in the
related literature. The objective of this paper is to narrow this gap by addressing the following
questions. Does the level of economic development affects entrepreneurial intention? If so, what
is the nature of the relationship between economic development and entrepreneurial intention?
Previous studies have shown that economic development can play an important role in
determining entrepreneurial activity. Using a panel of Organisation for Economic
Cooperation and Development (OECD) countries from 1972 to 1996, Parker and Robson
(2004) demonstrate that entrepreneurship increases with increasing the gross domestic
product (GDP) per capita. Wennekers et al. (2010) provide evidence of a U-shaped relationship
between the levels of economic development and early-stage entrepreneurial activity,
implying that start-up rates of enterprise are high in poor countries and decline as the level of
economic development increases. Amoros et al. (2016) show that economic development plays
a significant role that affects necessity and opportunity-based individual entrepreneurial
efforts. In light of these studies, one would also expect the level of economic development to
affect individuals’ intention to attempt an entrepreneurial career.
Specifically, the relationship between economic development and entrepreneurial
intention is hypothesized to be U-shaped. The rationale behind this hypothesis is as
follows. First, in poorer developing countries, individuals have strong incentives to start a
business due to the difficulties they face in finding paid jobs (e.g. Nikolaev et al., 2018).
Moreover, these countries are characterized by unfavorable business climates and suffer
from corruption, which encourages individuals to “grease the wheels” by engaging in bribery
to make it easier for them to start an entrepreneurial career (e.g. Hofstede et al., 2004; Belitski
et al., 2016). Thus, one would expect to observe higher entrepreneurial intentions levels in
poorer developing countries.
Second, as the levels of economic development of these countries increase, the business
climate starts to improve, allowing individuals to find alternative ways of entering the job
market and making them more reluctant to run the risk associated with starting a business,
which reduces their intentions to start an entrepreneurial career (e.g. Iyigun and Owen, 1998;
Wennekers et al., 2005). Third, beyond a certain level of high economic development, Entrepreneurial
individuals start observing a considerable improvement in the entrepreneurial climate (higher intention
quality of legal institutions, improvement in the infrastructure for entrepreneurship, more
sources of financial assistance to businesses, higher quality of education, etc.), which helps
them identify new opportunities for economic profit and provides them with incentives to start
their own businesses (e.g. Barro, 1991, 1996; Martınez-Fierro et al., 2016; Secundo et al., 2017).
All of these arguments, taken together, suggest a U-shaped relationship between the level of
economic development and entrepreneurial intention. 1809
The empirical analysis is based on a quantitative approach that formally tests for a
quadratic (U-shaped) relationship between economic development and entrepreneurial
intention based on longitudinal data covering 72 countries over the 2010–2016 period.
Economic development is measured using the GDP and the Global Competitiveness Index
(GCI) (e.g. Wennekers et al., 2005; Acs et al., 2008). While the GDP is based on the value added
by the resident producers, the GCI has the advantage of emphasizing the accumulation of
physical and human capital that cannot be captured by the GDP (Sala-i-Martın et al., 2014).
Data are gathered from the GEM, the International Monetary Fund (IMF) and the World
Economic Forum (WEF). The results reveal the existence of a U-shaped relationship between
the GDP per capita and entrepreneurial intention. The findings also provide support for a
similar relationship between GCI and individuals’ propensity to attempt an entrepreneurial
career. This empirical evidence suggests that individuals’ entrepreneurial intentions differ
between countries depending on the level of economic development.
This paper contributes to the entrepreneurship literature by presenting, to the author’s
knowledge, the first serious attempt to investigate the role of economic development on
entrepreneurial intention based on longitudinal data covering a large sample of countries.
Moreover, by providing evidence of a U-shaped relationship between economic development
and individuals’ propensity to attempt an entrepreneurial career, this study enhances the
understanding of the macrolevel determinants of entrepreneurial intention. Furthermore, the
results of this work, taken together with the results of previous research on the individual-
level determinants of entrepreneurial intention, allow for the construction of a more complete
picture of what influences individuals’ willingness to start a business. In addition, the current
paper can not only help researchers and academicians recognize how economic factors can
influence entrepreneurship but also enrich the debates over the role of public policy in
entrepreneurship, in general, and in entrepreneurial intention, in particular, during periods of
economic transition (Tan, 1996; Jackson et al., 1999; Kiss et al., 2012).
Several practical lessons emerge from the results of this study and hold implications for
policy makers. First, the study shows a U-shaped relationship that indicates a negative (positive)
association between the level of economic development and entrepreneurial intention in
developing (developed) countries. Policy makers in many developing countries should, therefore,
be aware that increasing levels of economic development do not necessarily imply higher rate of
engagement in entrepreneurial behavior among individuals. Second, the positive association
between economic development and entrepreneurial intention in developed countries might
come from the efforts of governments, and policy makers in these countries have invested to
promote entrepreneurship. One important implication of this study is that policy makers in
developing countries should influence individuals’ entrepreneurial intention through, for
example, entrepreneurship education, training and support by enhancing their propensity to
take risks and encouraging them to innovate and be job creators rather than job seekers.
This paper is organized as follows. The next section contains the literature review and
develops the research hypothesis. The Section 3 describes the data and the variables and
presents the statistical analysis. The Section 4 presents the results. The penultimate section
discusses the theoretical and practical implications of the study. The final section concludes
this work.
IJEBR Literature review and hypothesis development
26,8 Literature review
The concept of intention derives from social psychology and is defined as the state
of mind that directs human attention and actions toward a certain behavior (Bird, 1988).
In the entrepreneurship field, entrepreneurial intention refers to “a self-acknowledged
conviction by a person who intends to set up a new business venture and consciously plans to do
so at some point in the future” (Thompson, 2009, p. 676). Several scholars assert that
1810 entrepreneurial intention is determined by both individual and contextual determinants
(Bird, 1988; Hadjimanolis, 2016; Biraglia and Kadile, 2017). The individual determinants of
entrepreneurial intention are generally related to personal attitudes and perceived abilities to
perform an entrepreneurial behavior, as presented by the theory of planned behavior of Ajzen
(1991) and the entrepreneurial event model of Shapero and Sokol (1982), personality traits
(Espıritu-Olmos and Sastre-Castillo, 2015) and prior entrepreneurial exposure (Zapkau et al.,
2017; Nowi nski; Haddoud, 2019).
The contextual determinants refer to the political and economic factors that can affect
individuals’ willingness to start a business. This contextual approach is still
underexplored, and several academicians have highlighted the need to empirically
investigate these factors (e.g. Griffiths et al., 2009; Engle et al., 2010; Fayolle and Li~ nan,
2014). Moreover, scholars have argued that employing different samples covering different
countries is crucial to understanding the effects of the contextual determinants of
entrepreneurial intention (Krueger et al., 2000; Welter, 2011). Thus, a series of cross-national
studies on entrepreneurial intention has emerged over the last two decades (Kristiansen
and Indarti, 2004; Li~ nan and Chen, 2009; Munir et al., 2019, among others). One of the most
important results of this series indicates a high disparity in individuals’ entrepreneurial
intention among developing and developed countries (see, for example, Iakovleva et al.,
2011; de la Cruz Sanchez-Escobedo et al., 2014; Baluku et al.., 2019). In what follows, several
arguments will be presented to show that economic development can affect individuals’
propensity to start an entrepreneurial career.
Hypothesis development. The aim of this section is to explain how individuals’
entrepreneurial intentions differ between countries depending on the level of economic
development. First, one would expect poorer developing countries to have higher levels of
entrepreneurial intention for at least two reasons. The first is that individuals in these
countries face many difficulties in finding paid jobs (e.g. Feldmann, 2010; Azmat and
Samaratunge, 2009; El Harbi and Anderson, 2010), providing them with strong incentives
to start an entrepreneurial career (e.g. Blanchflower et al., 2001; Nikolaev et al., 2018).
The second is that these countries are typically characterized by unfavorable business
climates and suffer from corruption (see, for example, Mauro, 1995; Campos et al., 1999; Dutta
and Sobel, 2016). Interestingly, many previous studies have shown that corruption can help
entrepreneurship by compensating for the unfavorable business climate (Rose-Ackerman,
2001; Dreher; Gassebner, 2013; Avnimelech et al., 2014). This premise is commonly referred to
in the literature as the “grease the wheels” argument and indicates that the existence of higher
levels of corruption in poorer developing countries allows individuals to engage in bribery to
make it easier for them to start an entrepreneurial career by, for example, speeding up the
bureaucratic processes of firm formation. In this vein, Hofstede et al. (2004) report that
relatively poor countries with more perceived corruption have higher levels of self-
employment. Belitski et al. (2016) provide evidence that corruption can offset the discouraging
effect of high taxes on new firm formation. In light of these arguments, one would expect to
observe higher entrepreneurial intentions levels in poorer developing countries.
Second, as the levels of economic development of these countries increase, the business
climate starts to improve, attracting foreign investors and large international firms and
creating more job opportunities (e.g. Egger and Winner, 2005). In such a context, individuals
find alternative ways of entering the job market, reducing their intentions to start their own Entrepreneurial
businesses. One possible explanation of this behavior is that, in the presence of other job intention
opportunities, individuals are more reluctant to run the risk associated with starting a
business (Iyigun and Owen, 1998; Wennekers et al., 2005). Moreover, more business
opportunities are captured by large and international firms that enter the economy,
absorbing many entrepreneurial opportunities and directing individuals’ intentions toward
the stable professional earnings provided by these firms (Acs and Amoros, 2008).
Third, with higher levels of economic development, more individuals will observe a 1811
considerable improvement in the quality of legal institutions, in the infrastructure for
entrepreneurship and in the financial assistance to businesses (e.g. Barro, 1991, 1996;
Iakovleva et al., 2011; Aparicio et al., 2016; Martınez-Fierro et al., 2016). Moreover, in these
countries, the quality of education in general and entrepreneurship education, training and
support, in particular, plays a key role that results in more creative and innovative
entrepreneurs (e.g. Secundo et al., 2017). These factors will in turn improve the
entrepreneurial climate in more developed countries, helping more individuals identify
new opportunities for economic profit and providing them with incentives to start their own
businesses. In this vein, Rose-Ackerman (2001, 2004) argues that higher levels of
institutionalized trust can create an institutional context in which entrepreneurship can
flourish. Anokhin and Schulze (2009) provide evidence that as the corruption climate
improves, entrepreneurial activities rise slowly at first and then accelerate as institutional
trust rises, which implies a positive concave relationship between the control of corruption
and the levels of innovation and entrepreneurship. Simoes et al. (2016), Saeed et al. (2015) and
Boudreaux and Nikolaev (2019) argue that higher levels of education, in general, and
entrepreneurship education, in particular, can result in inspired individuals who are better
able to identify opportunities to start new ventures. Other prior studies have also shown that
more financial assistance and easier access to financing are important determinants of
entrepreneurship development (e.g. Mankart; Rodano, 2007; Armour and Cumming, 2008). In
light of the above arguments, one would expect a U-shaped relationship between the level of
economic development and entrepreneurial intention. Thus, the central hypothesis of this
paper can be written as follows:
H. There is a U-shaped relationship between the level of economic development and
entrepreneurial intention.
Figure 1 depicts the model guiding this study and proposed relationships.

Economic development
Entrepreneurial
- Gross Domestic Product per capita
Intention
- Global Competitiveness Index

Control variables
High_Tech_Export
Common_Law
GDP_Growth
Population
Unemployment
High_Income Figure 1.
Year dummies Proposed model
IJEBR Methodology
26,8 Data and variables
To test the hypothesis regarding the U-shaped relationship between economic development
and entrepreneurial intention, this study employs longitudinal data from GEM, the IMF and
the WEF, covering 72 countries over the period 2010–2016. The list of countries (with their
respective stages of economic development) is presented in the Appendix. Data on the
entrepreneurial intention (GDP and total population) of each country are gathered from the
1812 GEM (IMF) website. The GCI is obtained from the WEF reports. Data on gross national
income and unemployment are collected from the World Bank website. After merging these
data sources and excluding observations with missing values for the regression variables, the
final sample consists of 349 country-year observations.
Dependent variable. The variable EI used to measure entrepreneurial intention is taken
from the GEM’s Adult Population Survey. A number of prior studies, including the studies of
Guzman-Alfonso and Guzman-Cuevas (2012) and Ahmad et al. (2014), have used the
entrepreneurial intention variable computed by the GEM. This variable, defined in the GEM
report as the percentage of 18–64 age people who had the intention to start their own business
within three years, is used as the dependent variable in the empirical analysis.
Key independent variables. Two key independent variables reflecting the level of
economic development are considered in this study. The first is the GDP per capita. This
variable, expressed in thousands of current US dollars per capita, is commonly used as a
measure of economic development (Wennekers et al., 2005; Acs and Amoros, 2008;
Amoros and Cristi, 2008; Hessels and van Stel, 2011; Ghura et al., 2017). The second key
independent variable is the GCI. This index is constructed based on 12 pillars (institutions,
macroeconomic environment, health, etc.) and ranges from 1 to 7 (see Sala-i-Martın et al.,
2014; Appendix B, p. 49, for more details on the construction of this index). While the GDP is
based on the value added by the resident producers, the GCI has the advantage of
emphasizing the accumulation of physical and human capital that cannot be captured by
the GDP (Sala-i-Martın et al., 2014).
Control variables. In line with prior empirical research on the macrolevel determinants of
entrepreneurship (e.g. Ibeh, 2003; Wennekers et al., 2005; Fatoki, 2010; Estrin et al., 2013;
Laguna, 2013; Judge et al., 2015; Dheer, 2017; H€orisch et al., 2017), the model used in this article
includes the variables High_Tech_Export, Common_Law, GDP_Growth, population and
unemployment. High_Tech_Export is defined as the percentage of high-technology exports
of all manufactured exports. Common_Law is a dummy variable that takes one for countries
with English common-law system and zero otherwise. Data on common law countries are
from La Porta et al. (1998; 1999). GDP_Growth is the annual percentage growth rate of the
GDP per capita. Population refers to the population size of the country. Unemployment is
defined as the fraction of the labor force that is unemployed and looking for a job.
Additionally, following previous studies and exploring the effect of economic development on
entrepreneurship across nations (e.g. Acs et al., 2008), a dummy variable High_Income, that
takes the value one for high-income countries and zero otherwise, is used in this study. To
distinguish high- from low-income countries and to control for country effects, the
classification given by the World Bank is adopted. A high-income economy is defined by the
World Bank as a country that had a gross national income (GNI) per capita of $12,476 (US
dollars) or more in 2015. Finally, year dummies are also included in the model to control for
unobserved factors that may influence entrepreneurial intention (e.g. Takata, 2016; Van Vu
et al., 2018).
Table 1 provides the variable definitions and data sources. The table also displays
descriptive statistics for all the variables used in the empirical analysis. On average,
approximately 21% of the individuals in the 18–64 age group in the studied countries intend
to start a business within three years. EI ranges from 2.12% (Russia in 2016) to 79.1%
 Definition Data source Mean SD Min Max
Entrepreneurial
intention
Dependent variable
EI Entrepreneurial intention, GEM 21.056 15.31 2.12 79.1
defined in the GEM as the
“Percentage of 18–64 age
group (individuals involved in
any stage of entrepreneurial 1813
activity excluded) who intend
to start a business within three
years”
Key independent variables
GDP Gross domestic product is IMF 22.656 23.303 0.224 113.612
expressed in thousands of
current US dollars per capita
GCI Global Competitiveness WEF 4.509 0.607 3.08 5.81
Index is constructed based on
12 pillars (including, for
example, institutions,
macroeconomic
environment, health, etc.) and
ranges from 1 to 7
Control variables
High_Tech_Export The percentage of high- World 13.633 10.694 0.093 52.445
technology exports of all bank
manufactured exports
Common_Law A dummy variable that takes La Porta 0.292 0.455 0 1
one for countries with et al. (1998,
English common-law system 1999)
and zero otherwise
GDP_Growth Annual percentage growth World 2.134 2.911
8.998 23.985
rate of GDP per capita Bank
Population The country’s population size IMF 79.072 217.474 0.318 1381.134
Unemployment The fraction of the labor force World 8.629 5.877 0.58 32
that is unemployed and Bank
looks for a job
High_Income A dummy variable that takes World 0.472 0.499 0 1
the value one for high-income Bank
countries and zero otherwise.
A high
income economy is
defined by the World Bank as Table 1.
a country with a gross Variable definitions
national income per capita of and descriptive
$12,476 or more in 2015 statistics

(Uganda in 2012). Moreover, the mean GDP of the sample countries is approximately $22.7
thousand, and the GCI score ranges from 3.08 (Malawi in 2016) to 5.81 (Switzerland in 2016).
Table 2 reports the correlation matrix for the dependent, independent and control
variables and shows that none of the correlation coefficients exceed 0.8, which indicates that
multicollinearity does not constitute a problem in the empirical analysis. To further ensure
that multicollinearity is not an issue, the variance inflation factors (VIFs) are also computed.
The VIFs do not exceed the rule-of-thumb value of ten, providing more assurance that
multicollinearity is not a serious problem in this study (Neter et al., 1989).
 26,8

1814
IJEBR

Table 2.
Correlation matrix
1 2 3 4 5 6 7 8 9

1. EI 1.0000
2. GDP
0.549*** 1.0000
3. GCI
0.583*** 0.779*** 1.0000
4. High_Tech_Export
0.423*** 0.347*** 0.592*** 1.0000
5. Common_Law 0.151***
0.083*
0.100** 0.054 1.0000
6. GDP_Growth 0.184***
0.197***
0.025 0.109** 0.047 1.0000
7. Population
0.017
0.170*** 0.019 0.088* 0.092** 0.261*** 1.0000
8. Unemployment
0.020
0.166***
0.217***
0.326***
0.022
0.166***
0.174*** 1.0000
9. High_Income
0.574*** 0.717*** 0.626*** 0.267***
0.117***
0.255***
0.214***
0.038 1.0000
Note(s): t-statistics in parentheses *p < 0.10, **p < 0.05, ***p < 0.01
Analysis Entrepreneurial
The hypothesis of this study predicts a U-shaped relationship between economic intention
development and entrepreneurial intention. To test this hypothesis, quadratic
specifications are used in which EI is regressed against the variables GDP and GCI and
their quadratic terms. The choice of using such quadratic specifications is based on a
comparison with other model specifications, namely, linear and inverse (L-shaped)
specifications, using a number of criteria such as the adjusted R-squared measure, Akaike
and Schwarz tests (e.g. Wennekers et al., 2005; Acs et al., 2008). More details about these 1815
specifications are presented by van Stel et al. (2004, Annex II).
In a first step, specifications of the following model are estimated (subscripts are
suppressed for notational convenience)
EI ¼ α þ β1 Econamic Dev þ β2 Econamic Dev Squared þ β3 High Tech Export
þ β4 Common Law þ β5 Gdp Growth þ β6 Population þ β7 Unemployment
þ β8 High Income þ Year Dummies þ ε
(1)

where Economic_Dev is one of the two economic development measures of GDP and GCI.
The main coefficients of interest are those of Economic_Dev and Economic_Dev_Squared.
The coefficients β1 and β2 capture the presence of a U-shaped relationship between economic
development and entrepreneurial intention.
In a second step, the Lind and Mehlum (2010) method is applied to ensure that the
relationship between economic development and entrepreneurial intentions is indeed
U-shaped (e.g. Haans et al., 2016; Franco et al., 2020). According to this method, a further step
that analyzes the lower bound, the upper bound and the extreme point (i.e. the negative peak)
of the curve is necessary to conclude that a U-shaped relationship exists. In particular, three
conditions have to be met: (1) a significantly negative slope of the lower bound; (2) a
significantly positive slope of the upper bound and (3) an extreme point that is located
between the two extreme values of the curve. In the next section, the abovementioned steps
are applied to test the central hypothesis of this study.

Results
Table 3 provides the regression results regarding the effect of economic development, as
measured by GDP and GCI, on entrepreneurial intention. In column (1) of Table 3, six control
variables are included, namely, High_Tech_Export, Common_Law, GDP_Growth,
Population, Unemployment, High_Income, as well as year dummies. In column (2), the
variable GDP and its quadratic term, GDP_Squared, are included to test for the presence of a
U-shaped relationship between GDP and EI. To minimize the risk of multicollinearity, the
variable GDP is mean-centered (e.g. Johnston and Menguc, 2007; Ben-Amar et al., 2013).
Moreover, since the correlation between the variables GDP and High_Income exceeds 0.7, the
latter is not included in the regression, which is in line with Acs and Amoros (2008).
The results show that the coefficient of GDP is negative and statistically significant at the 1%
level (β 5
0.515, p < 0.001). More importantly, the coefficient of GDP_Squared is
significantly positive at the 1% level (β 5 0.006, p < 0.001). These results clearly indicate a
U-shaped relationship between GDP and EI. Similar findings are revealed in column (3) using
the variable GCI (mean-centered) and its quadratic term since the coefficient on GCI
(GCI_Squard) is statistically positive (negative) at the 1% level (for GCI, β 5
10.516,
p < 0.001; for GCI_Squared, β 5 7.684, p < 0.001). Table 3 also shows that the three models fit
IJEBR (1) (2) (3)
26,8
GDP
0.515***
(
12.145)
GDP_Squared 0.006***
(8.014)
GCI
10.516***
1816 (
5.124)
GCI_Squared 7.684***
(3.693)
High_Tech_Export
0.549***
0.423***
0.339***
(
8.160) (
5.998) (
4.461)
Common_Law 6.150*** 6.180*** 4.657***
(3.867) (4.098) (3.193)
GDP_Growth 0.452** 0.451** 0.717***
(2.012) (2.137) (3.024)
Population
0.008**
0.010**
0.006
(
2.109) (
2.562) (
1.591)
Unemployment
0.375***
0.492***
0.373***
(
2.716) (
3.747) (
2.957)
High_Income
14.201***
9.558***
(
10.584) (
5.797)
Constant 36.138*** 25.957*** 28.171***
(13.133) (10.586) (8.961)
Year dummies Yes Yes Yes
N 349 349 349
Table 3. Adjusted R-squared 0.471 0.515 0.535
Regression results F-value 22.47*** 28.26*** 29.65***
(dependent Mean VIF 1.48 1.74 1.69
variable: EI) Note(s): t-statistics in parentheses **p < 0.05, ***p < 0.01

the data reasonably well with an adjusted R-squared of more than 47% and significant
F-values at the 1% level.
These results support the central hypothesis of this study and suggest a U-shaped
relationship between both the GDP and GCI and the entrepreneurial intention. This
relationship implies that individuals’ entrepreneurial intentions differ between countries
depending on the level of economic development. In poorer developing countries, individuals
face difficulties in finding paid jobs, providing them with strong incentives to start an
entrepreneurial career. Moreover, the unfavorable business climates characterized by the
existence of corruption in these countries allows individuals to engage in informal methods
(e.g. bribery) to make it easier for them to start an entrepreneurial career (the “grease the
wheels” argument). As the levels of economic development of these countries increase, their
business climates improve, which creates more job opportunities and results in lower levels of
entrepreneurial intention and a negative slope of the lower bound of the curve.
As the levels of economic development continue to increase, more individuals will observe
a considerable improvement in the quality of legal institutions, in the infrastructure for
entrepreneurship, in the financial assistance to businesses and in the quality of education, in
general, and entrepreneurship education, training and support, in particular. These factors
will in turn improve the entrepreneurial climate in more developed countries, helping more
individuals to identify new opportunities for economic profit and providing them with
incentives to start their own businesses, which increases the levels of entrepreneurial
intentions and results in a positive slope of the upper bound of the curve.
 To further ensure that the relationship between economic development and Entrepreneurial
entrepreneurial intention is U-shaped, the Lind and Mehlum (2010) method is applied. intention
Prior studies have employed this method, which requires an analysis of the negative peak and
the lower and upper bounds of the curve that represents the studied relationship (Haans et al.,
2016; Franco et al., 2020; among others). Interestingly, Table 4 shows that the three conditions
of the Lind and Mehlum (2010) approach are satisfied for the (mean-centered) variables of
GDP (the first two columns of Table 4) and GCI (the last two columns of Table 4).
In particular, the slope of the lower bound for each variable is negative and statistically 1817
significant at the 1% level, while the slope of each upper bound is strongly significantly
positive. Moreover, the extreme points of the GDP and GCI are located between the extreme
values of their respective curves. Graphically, Figure 2 shows the U-shaped curves that
represent the relationships between both the GDP (the left side of the figure) and GCI (the
right side of the figure) and the EI. Figure 2 indicates that countries located on the left part
of each curve register decreasing entrepreneurial intentions as their levels of economic
development increase. Conversely, countries on the right part of each curve – that is, after
the extreme point – register increasing entrepreneurial intentions as their GDP and GCI
increase.

Discussion
Theoretical implications
The present work provides several contributions to the literature. First, it presents one of the
first serious attempts to examine the role of economic development in entrepreneurial
intention. This study also advocates the need to further investigate the macrolevel
determinants of entrepreneurship in general and entrepreneurial intention in particular. The
previous literature has indicated that individuals’ propensity to attempt an entrepreneurial
career differs among people in countries with different levels of economic development (e.g.
Kristiansen and Indarti, 2004; Iakovleva et al., 2011), but studies on the macrolevel
determinants of entrepreneurial intention using longitudinal data are very scarce. The
present paper attempts to bridge this gap.
Second, by providing arguments and evidence regarding the existence of a U-shaped
relationship between economic development and entrepreneurial intention, this study offers a
clearer description of how individuals’ propensities to attempt an entrepreneurial career are
influenced by the economic status of their countries. For instance, the reported U-shaped
relationship indicates that in many developing countries, entrepreneurial intention decreases
as the levels of GDP and GCI increase, which confirms previous studies showing that an
increase in the level of economic development may lead to a decline in individuals’ willingness
to take the risk associated with starting a business (Iyigun and Owen, 1998; Carree et al.,

Model (2) Model (3)

Lower bound Upper bound Lower bound Upper bound

Interval
22.433 90.956
1.429 1.301

Slope
0.774*** 0.534***
32.473*** 9.482***
(
10.759) (5.483) (
4.206) (2.425)
t-value p-value t-value p-value
Overall test 5.48*** 0.000 2.42*** 0.008
Extreme point 44.685 0.684 Table 4.
Note(s): t-values are in parentheses Tests for the
***denotes significance at the 1% level U-shaped curve
IJEBR

40
26,8

50
30

1818

40
Fitted values

Fitted values
20

30
10

20
Figure 2.
U-shaped relationship
between economic
development and
10
0

entrepreneurial
intention mean-centered GDP mean-centered GCI

2002). The U-shaped relationship also implies that in more developed countries, there is a
positive association between both the GDP and GCI and the entrepreneurial intention,
corroborating a number of earlier research findings suggesting that higher levels of economic
development positively influence the motivations of individuals to start their own businesses
(Wennekers et al., 2005).
Third, the results of this study, combined with the results of previous research on the
individual-level determinants of entrepreneurial intention (e.g. Krueger et al., 2000; Souitaris
nan and Chen, 2009), allow for a more complete description of what influences
et al., 2007; Li~
individuals’ decisions to attempt an entrepreneurial career. Furthermore, the present research
will not only help researchers and academicians recognize how economic factors can
influence entrepreneurship but will also enrich the debates over the role of public policy in
entrepreneurship in general, and in entrepreneurial intention in particular, during periods of
economic transition (Tan, 1996; Jackson et al., 1999; Kiss et al., 2012).

Practical implications
In addition to contributing to the theory, this research may offer valuable insights into policy
makers. First, the U-shaped relationship reported in this study suggests that individuals’
entrepreneurial intentions differ between countries depending on the level of economic
development. Policy makers in developing countries may find value in this work, as it
indicates that enhancing economic development is not necessarily associated with higher
engagement in entrepreneurial behavior.
Second, the economic transitions of these countries are generally accompanied by the
creation of more job opportunities, reducing people’s incentives to take risks by starting an
entrepreneurial career. Thus, it is important for policy makers in developing countries to seek
means of emphasizing entrepreneurial initiative by making individuals discern
entrepreneurship as a desirable career choice. To achieve this objective, policy makers can Entrepreneurial
shape individuals’ perception of entrepreneurship through education, training and support intention
by enhancing their propensity to take risks and encouraging them to innovate and to be job
creators rather than job seekers (see, e.g. Nakara et al., 2019).
Third, another important implication of this paper is that efforts by governmental bodies
interested in fostering entrepreneurial intention should be accompanied by policy reforms
that would help to enhance economic development and to control factors that can hinder
economic progress. For instance, previous studies have shown that factors such as corruption 1819
and low institutional development may have a negative impact on economic development
(e.g. Mauro, 1995; Cavalcanti et al., 2008; Rose-Ackerman and Palifka, 2016). Such policy
reforms can help to increase economic development, which, through the different
mechanisms explained in this paper, will in turn affect entrepreneurial intention.
Fourth, periods of economic slowdowns and booms have been shown by previous studies
to affect the level of economic development and growth (e.g. Kaminsky and Reinhart, 1999;
Cerra and Saxena, 2008). By linking economic development to individuals’ willingness to start
an entrepreneurial career, this work draws the attention of policy makers to the necessity of
creating policy schemes to support and stimulate entrepreneurial intention during periods of
economic busts and booms. For instance, during periods of economic slowdowns,
governments should modify regulations to stimulate individuals’ entrepreneurial
intentions, which can serve as a way of stimulating entrepreneurial activity and reducing
unemployment. Moreover, taking actions to shape individuals’ perception of
entrepreneurship, for example, through education, training and support (e.g. Packham
et al., 2010; Jones et al., 2018), can serve as preventive measures that will help the economy
recover more quickly from economic crises.

Limitations and future research perspectives

As with any study, the current work is not without limitations. The first limitation is related
to data availability, which does not allow for an investigation of the role of cultural and social
differences across countries in the relationship between economic development and
entrepreneurial intention. While there is a substantial body of research that identifies
cultural and social dimensions as important determinants of entrepreneurship (e.g. Shinnar
nan et al., 2015; Jones et al., 2019), future work on the role of these dimensions in
et al., 2012; Li~
shaping the relationship between economic development and entrepreneurial intention could
provide important insights. Indeed, some studies consider that individualistic culture
appears to be more favorable for the development of entrepreneurship (Mueller and Thomas,
2001). However, other studies confirm that collectivist values help to build a social network
and to develop interpersonal trust, which plays a key role in the proliferation of
entrepreneurial activities (Pinillos and Reyes, 2011). In sum, the literature provides
contradictory results regarding the effect of individualistic–collectivist values on
individuals’ propensity to attempt an entrepreneurial career. Thus, to better understand
differences in entrepreneurial intention across nations, future studies could explore the
combined effect of individualism–collectivism and macrolevel economic factors. More
precisely, future research can provide more useful guidance in how these cultural values
(individualism–collectivism) would moderate the relationship between economic
development and entrepreneurial intention.
A second limitation refers to the use of the overall GCI, which does not allow researchers to
perform a detailed examination of the impact of its different components (institutions,
infrastructure, health, education, etc.) on entrepreneurial intention. Future research could
extend the current research by exploring the impact of global competitiveness subindexes
such as the institutional factors, government expenditure in infrastructure, health and
IJEBR education. In particular, further research may use the global competitiveness subindexes
26,8 rather than the global index to better understand which macrolevel factors drive the
relationship between the level of economic development and individuals’ willingness to
start a business. Despite these limitations, this paper makes several contributions to the
understanding of the macrolevel determinants of entrepreneurial intention.

Conclusion
1820 The present research is among the first serious attempts to investigate the effect of economic
development on entrepreneurial intention. A hypothesis on a U-shaped relationship between
economic development and individuals’ decision to pursue an entrepreneurial career is
derived. To test this hypothesis, a sample of observations covering 72 countries over 2010–
2016 is used, and data from different sources including the GEM, the IMF and the WEF are
gathered.
The findings provide evidence of the existence of a U-shaped relationship between the
level of GDP per capita and entrepreneurial intention. The results also provide support for a
similar relationship between the GCI and individuals’ propensity to attempt an
entrepreneurial career. This empirical evidence implies that individuals’ entrepreneurial
intentions differ between countries depending on the level of economic development.
To the authors’ knowledge, this article presents the first attempt to investigate the role of
economic development on entrepreneurial intention based on longitudinal data covering a
large sample of countries. Moreover, by providing evidence of a U-shaped relationship
between economic progress and individuals’ propensity to attempt an entrepreneurial career,
this study enhances the understanding of the macrolevel determinants of entrepreneurial
intention.

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IJEBR Appendix
26,8

Stage 1 Stage 2
Factor- Transition from stage Efficiency- Transition from stage Stage 3
driven 1 to stage 2 driven 2 to stage 3 Innovation-driven
1826
1. Ghana 9. Algeria 14. China 27. Argentina 43. Australia
2. India 10. Bolivia 15. Colombia 28. Brazil 44. Austria
3. Malawi 11. Botswana 16. Egypt 29. Chile 45. Belgium
4. Nigeria 12. Iran 17. El Salvador 30. Costa Rica 46. Canada
5. Pakistan 13. Philippines 18. Guatemala 31. Croatia 47. Czech Republic
6. Uganda 19. Indonesia 32. Hungary 48. Denmark
7. Vietnam 20. Jamaica 33. Latvia 49. Estonia
8. Zambia 21. Macedonia 34. Lithuania 50. Finland
22. Namibia 35. Malaysia 51. France
23. Peru 36. Mexico 52. Germany
24. Romania 37. Panama 53. Greece
25. South 38. Poland 54. Iceland
Africa
26. Thailand 39. Russia 55. Ireland
40. Suriname 56. Israel
41. Turkey 57. Italy
42. Uruguay 58. Japan
59. Luxembourg
60 Netherlands
61. Norway
62. Portugal
63. Singapore
64. Slovak Republic
65. Slovenia
66. Spain
67. Sweden
68. Switzerland
69. Taiwan
70. Trinidad and Tobago
Table A1. 71. United Kingdom
Stages of economic 72. United States
development Source(s): WEF report 2014

Corresponding author
Walid Adam Nakara can be contacted at: w.nakara@montpellier-bs.com

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