Explaining regional differences in firm formation rates: how far are government policies important for entrepreneurship?

The growing number of studies shows that government policies and measures are critical in determining entrepreneurship levels of regions. Any changes in the government policies and measures are, therefore, expected to bring significant changes at the entrepreneurship levels. This paper aims to explore the importance of the government policies and measures, along with supply and demand-side determinants in regional entrepreneurship in Turkey and explains the convergence of entrepreneurship among two distinct periods corresponding to changes in the government policies and measures concerning entrepreneurship.

Looking at a study on 81 NUTS-III regions of Turkey, this paper focusses on regional determinants important in the separation of regions with different entrepreneurship trajectories (based on the initial level and the rate of increase in entrepreneurship). Using discriminant function analysis, this paper tries to show how far government policies are important in distinguishing regions with different entrepreneurship levels.

The outcomes of the analysis show that certain policies and measures recently introduced have become instrumental in triggering higher entrepreneurship levels in regions with already higher levels of entrepreneurship, but not in regions with initially lower levels of entrepreneurship.

This study contributes to the existing regional entrepreneurship literature through introducing the research findings on the importance of government policies and institutions on regional entrepreneurship, besides the role of regional capacities and assets.