Drivers of entrepreneurship in Europe: the role of digitalization, innovation, capital investments, unemployment, and sustainability

Purpose This paper examines the impact of digitalization, innovativeness, capital formation, unemployment and sustainable development on entrepreneurship in European countries. By analyzing data from 42 European Council countries between 2000 and 2021, the study aims to uncover the relationships between these factors and entrepreneurship, with a focus on upper-middle-income and high-income countries. Design/methodology/approach The research uses panel cointegration, panel ARDL and panel Granger causality to examine the data across three panels. This methodological approach allows for a comprehensive assessment of relationships between the variables of interest. Findings In all countries and high-income countries, information and communication technology (ICT), unemployment (UNE) and the Sustainable Development Goals (SDGs) positively and significantly influence entrepreneurship, while R&D expenditure (RDE) and gross fixed capital formation (GFCF) negatively and significantly influence entrepreneurship. In upper-middle-income countries, ICT has no statistical significance, but RDE, GFCF, UNE and SDG have a significant negative impact on entrepreneurship. In terms of causality, there is bidirectional causality between all variables in all countries and high-income countries, while there are mixed causal relationships in the upper-middle-income group. Originality/value This paper contributes to the literature by focusing on the macroeconomic determinants of entrepreneurship, with particular emphasis on ICT, R&D and sustainable development. The study offers new insights into how these factors influence entrepreneurship in different income levels of European countries. By examining the interaction between entrepreneurship and all considered variables, this research provides a deeper understanding of the dynamics of entrepreneurship and possible policy implications.