From entrepreneurship to sustainable futures: investigating the nexus between new business density, economic growth, and carbon emissions

Abstract

The readiness of businesses to address global climate change is pivotal for achieving sustainable development. However, the dynamics of business development remain underexplored, thereby limiting the depth and scope of research in this area. To this aim, the study examines the relationship between CO2 emissions and new business density (NBD) in the top 14 countries with the highest NBD (Hong Kong, Cyprus, New Zealand, Estonia, Malta, United Kingdom, Australia, Botswana, Iceland, Latvia, Mauritius, Norway, Sweden, and Georgia) from 2006 to 2020, within the framework of Schumpeter’s theory and the environmental Kuznets curve (EKC) hypothesis, incorporating control variables such as renewable energy consumption (REC) and population size. To estimate the relationships between variables, we employ the novel Method of Moments Quantile Regression (MMQR) approach. The findings suggest that higher NBD is associated with increased CO2 emissions. The results support the EKC hypothesis, positing an inverted U-shaped relationship between economic growth and environmental degradation, and highlight the mitigating effects of REC and population growth on CO2 emissions. These findings emphasize the need for countries to align labor legislation with sustainable development objectives and to promote strategies grounded in environmental principles, green economic practices, and eco-friendly technologies.