Do Human Capital, Economic Growth, and Trade Openness Instigate Entrepreneurial Activities? The Moderating Role of Financial Development

Abstract

This research dives into the complex interplay of human capital, economic growth, trade openness, and entrepreneurial activities, while also investigating the moderating influence of financial development. The study uses two steps generalized method of movement (GMM) and the random effect estimation technique by using the data from 2011 to 2019. The results indicate that human capital has a significant and positive impact on entrepreneurial activities through secondary and tertiary education. Also, financial development has a strong moderating effect on the relationship between human capital and entrepreneurial activities especially at secondary and tertiary levels of education. Economic growth and trade openness also instigate entrepreneurial activities in primary, secondary, and tertiary education. Our empirical findings suggest that financial development benefits entrepreneurial activities by satisfying entrepreneurs' demand for accessible, cheap, and extensive credit, as well as investors' demand for efficient and cost-effective risk and information management. This research provides policymakers, researchers, and academia with valuable information for fostering an environment conducive to entrepreneurial activities.