On the Determinants of Entrepreneurial Activity: Social Norms, Economic Environment and Individual Characteristics

Abstract

This paper reviews the literature on the determinants of entrepreneurial activity and investigates to what extent differences in population, business environment and cultural values contribute to explaining differences in entrepreneurial activity across Swedish municipalities. Individual characteristics and business environment are the most important factors in explaining entrepreneurial choice. However, we find that cultural values and, most likely, social norms also matter. The data suggest that individuals are more likely to become entrepreneurs where there are more entrepreneurs, even if entrepreneurial income is lower. We explain why and to what extent this may be interpreted as evidence of social norms.

Keywords: Entrepreneurial choice, social interactions, social norms, agglomeration economies

JEL Classification: M13, J24, Z13, R12