Abstract
The paper presents the relationship of entrepreneurship and economic growth. Based on Romer (1990) Endogenous growth models and Acemoglu et al. (2005), the institution affects economic growth through the knowledge spillovers. When the institution is more perfect, economic growth will increase. Data from 45 countries for the years 2001 and 2015, as collected by Global Entrepreneurship Monitor (GEM) research, aim to empirically investigate the nonlinear relationship of entrepreneurship and economic growth by threshold regression. Threshold regression with the global competitiveness index-the institution (GCII) as threshold variable proves there is a threshold which GCII is equal to 4.093, and distinguishes countries into low(GCII≤4.093) and high(GCII>4.093) level of institution development by the threshold. The relationship of entrepreneurship and economic growth is with no significance in countries in low level, and is positive with significance in countries in high level. In addition, two-step system GMM with data distinguished into low and high level proves that the entrepreneurship rate significantly and positively impacts on economic growth rate in high level.