The purpose of this paper is to extend the literature on entrepreneurship and corruption by examining the link between productive and unproductive entrepreneurial activities as moderated by economic freedom. Specifically, the authors hypothesize that various aspects of economic freedom are contextual in their moderating effects, so that what matters in terms of economic freedom will depend on other factors such as levels of human capital.
The authors test these hypotheses by incorporating aggregated and disaggregated measures from the Economic Freedom of the World into a model of international entrepreneurial activity.
The results indicate that not only is economic freedom a major determinant of the level of entrepreneurial activity across countries, as previously verified, but that it also moderates the relationship between human capital, corruption, and productive entrepreneurship.
These findings resolve many of the ambiguities previously identified in the literature on the link between corruption, entrepreneurship, and growth.
