Economic Prosperity and the Implementation of Sustainable Development Models Among <scp>SMEs</scp> in European Countries: Correlational Analysis and Incentive System

ABSTRACT Sustainable entrepreneurship remains a pivotal driver in the transition toward inclusive and environmentally responsible economic development across Europe. This study investigates the influence of economic prosperity and policy frameworks on sustainable entrepreneurial activities among 30 European countries from 2018 to 2023. Employing a mixed‐methods approach, quantitative analyses including descriptive statistics, correlational, and regression models were complemented by qualitative policy evaluations. Results reveal a significant positive relationship between GDP per capita and sustainable entrepreneurship ( r = 0.64, p &lt; 0.001), with GDP and SDG Index jointly explaining 57% of the variance in sustainable entrepreneurship levels (adjusted R 2 = 0.57). Sustainable entrepreneurship averages 18.2% across countries, ranging from 9.4% in lower‐income Bulgaria to 27.8% in affluent Sweden. Clustering analyses further identified three distinct groups differentiated by economic prosperity, sustainability scores, and policy support. Qualitative findings underscore that nations with integrated policy frameworks combining fiscal incentives and regulatory clarity –exemplified by Denmark and Sweden–experience markedly higher sustainable entrepreneurial activity. In contrast, countries with fragmented or minimal support lag behind. The study concludes that fostering sustainable entrepreneurship requires a holistic policy ecosystem aligned with economic growth, offering actionable insights for policymakers and business leaders striving to accelerate sustainable development. These findings illuminate pathways to reinforce Europe's sustainable economy, with implications extending to emerging markets.