As several European governments develop new start-up programmes during recessions, the
appropriateness of these policies recently has become a hot policy issue. This study suggests
that the contribution of these incentives is dubious, if aimed to combat economic and jobs crises
as part of the entrepreneurship policy, and can be shaped by various country-specific factors, such
as the economic situation and the stringency of labour laws. To provide support for these claims,
this paper investigates the underlying determinants of an individual's decision to switch from
unemployment to self-employment in Europe and stresses the need to devote special attention
to the role of three essential dimensions: (i) the existing heterogeneity within self-employment,
by considering self-employed individualswho hire employees (employers) and self-employed individualswithout
personnel (own-accountworkers) as separated groups; (ii) the effects of differentmeasures
of social capital and network contacts, as forms ofmicro level institutional factors; and
(iii) the explanatory power of cross-country differences in the state of the economy, expenditure
on start-up incentives, and the stringency of labour laws, as forms of macro level institutional
factors. This study has useful theory and policy implications for entrepreneurship development.