We explore the regional determinants of entrepreneurial activity with latent variables framework in which entrepreneurship is not observed directly, but manifested in activities such as producing patentable innovations, receiving venture funding and establishing new enterprises. We find that R&D expenditures, the presence of anchor firms, good (small) government and the availability of intellectual-property lawyers are positively associated with entrepreneurial activity, while the numbers of

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... entists, the presence of anchor universities and other measures of the political environment do not have statistically significant effects. We argue more generally for the benefits of treating entrepreneurship as a latent construct.