THE IMPACT OF ECONOMIC DEVELOPMENT AND INNOVATION POTENTIAL ON ENTREPRENEURIAL ECOSYSTEMS IN THE WESTERN BALKAN AND SCANDINAVIAN COUNTRIES

Abstract

Purpose: Entrepreneurship is a key driver of economic growth and development. This paper examines the interdependence between economic development, innovation, and the growth of entrepreneurial ecosystems in Scandinavian and Western Balkan countries for the year 2024.

Methodology: The study employs standard statistical methods, including correlation analysis, simple and multiple linear regression, followed by a panel data analysis (Fixed and Random Effects models) with a Hausman specification test to validate the robustness of the findings.

Results: Results show that both economic development and innovation positively influence entrepreneurial ecosystems in the cross-sectional analysis. However, panel data analysis indicates that innovation (GII) remains a statistically significant predictor over time, while the effect of GDP per capita becomes less pronounced when innovation is accounted for, suggesting that the relative influence of economic development may be captured through innovation channels in this specific sample. The Random Effects model was validated as the appropriate specification by the Hausman test.

Conclusion: The findings suggest that while economic growth and innovation are jointly linked to ecosystem development, innovation potential shows a more robust statistical association in the observed period. When countries are observed over time, these results should be treated as exploratory, given the specific regional focus and sample size. Policies that strengthen innovation capacity and economic development can effectively foster entrepreneurship, particularly in emerging economies.