Across countries and periods of time, the level of entrepreneurship differs considerably. Both the causes and consequences of entrepreneurship are a matter of extensive scientific debate as well as of great policy importance. The present paper deals with the determinants of entrepreneurship. An eclectic theory of entrepreneurship is introduced. This eclectic theory provides an integrated framework, drawing on disparate strands of literature to create a better understanding of the different role that entrepreneurship plays in different countries and time periods. This framework is designed to guide future empirical research in this area and to provide insights for policymakers striving to promote entrepreneurship.

This eclectic theory focuses not only on the country level of analysis but is also linked to the level of individual occupational choices. Accordingly, the analysis is not confined to economics but also draws upon insights from psychology and sociology. The starting point of the analysis is the distinction between the supply side and the demand side of entrepreneurship. Key elements of the supply side are the demographic composition of the population, the resources and abilities of individuals, and their attitudes towards entrepreneurship, i.e., their preferences. The demand side represents the opportunities for entrepreneurship.

Besides the distinction between demand and supply sides and a description of the process of occupationanl choice, attention is paid to a discrepancy between actual and equilibrium rates of entrepreneurship. The role policy measures play is dealt with extensively, as well as the pervasive, but difficult to establish, role of culture.