Entrepreneurship is widely acknowledged as a fundamental driver of economic growth, innovation and job creation, contributing not only to economic performance but also to broader societal development. In recent decades, scholarly attention has increasingly shifted towards understanding entrepreneurship as a human-centred activity, emphasising the experiences, motivations and well-being of entrepreneurs themselves (Brieger, De Clercq & Hessels 2021; Stephan 2018). This shift reflects a growing recognition that sustainable entrepreneurial activity depends not only on financial outcomes but also on entrepreneurs’ psychological functioning and quality of life.

Subjective well-being (SWB), commonly defined as individuals’ cognitive and affective evaluations of their lives, has emerged as a central construct in economics, psychology and management research (Diener, Oishi & Tay 2018). A substantial body of evidence within the economics of happiness literature demonstrates that higher levels of SWB are associated with improved health, resilience, productivity and long-term economic participation (Diener & Seligman 2004; Diener et al. 2017). Within the entrepreneurial context, well-being is particularly salient, as entrepreneurs are frequently exposed to heightened levels of uncertainty, financial risk, time pressure and emotional demands. While entrepreneurship offers intrinsic rewards such as autonomy, flexibility and self-realisation, it also entails stressors that may undermine overall life satisfaction and mental health (Nikolaev, Boudreaux & Wood 2019; Stephan 2018).

Despite the growing interest in SWB, research focusing explicitly on entrepreneurs remains relatively limited. Early studies predominantly compared the well-being of self-employed individuals with that of salaried employees, often reporting higher job satisfaction among entrepreneurs but mixed results regarding overall life satisfaction (Binder & Coad 2013; Millán et al. 2013). More recent research has sought to explain these mixed findings by examining individual-level determinants such as income, job satisfaction, psychological traits, health and motivational drivers (Brieger et al. 2021; Nikolaev et al. 2019). However, much of this literature remains largely confined to micro-level explanations, offering an incomplete picture of the broader forces shaping entrepreneurs’ SWB.

Recent studies have further emphasised the importance of integrating both individual and contextual determinants in explaining entrepreneurial well-being (Nikolaev et al. 2020; Stephan 2022).

Parallel to this strand of research, institutional economics and political economy emphasise the crucial role of institutional quality in shaping economic behaviour and individual outcomes. Political stability, regulatory efficiency, business freedom and corruption control have been shown to influence entrepreneurial activity, investment decisions and economic performance across countries (Fritsch, Sorgner & Wyrwich 2019; Krasniqi & Desai 2016). Importantly, institutional conditions also play a significant role in shaping individuals’ life satisfaction and overall well-being, beyond their effects on income or employment (Frey & Stutzer 2000; Helliwell & Huang 2008). Yet, empirical studies that explicitly integrate institutional-level conditions into analyses of entrepreneurial SWB remain scarce.

This fragmentation in the literature reveals a critical research gap. Entrepreneurs’ SWB is shaped by a complex interplay between individual psychosocial characteristics and the broader institutional environment in which entrepreneurial activity occurs. Focusing exclusively on individual-level determinants risks neglecting the contextual conditions that enable or constrain entrepreneurs’ autonomy, security and perceived opportunities. From a theoretical perspective, this limitation restricts engagement with self-determination theory, which emphasises the satisfaction of basic psychological needs, as well as institutional theory, which highlights the role of formal and informal rules in shaping individual behaviour and outcomes (Frey & Stutzer 2000; Ryan & Deci 2001).

Addressing this gap, the present study adopts a multilevel analytical perspective to examine how psychosocial and institutional factors jointly determine entrepreneurs’ SWB. By integrating individual-level psychosocial variables – such as job satisfaction, perceived financial situation, social trust, optimism and self-assessed health – with country-level indicators of institutional quality, this study provides a more comprehensive and theoretically grounded understanding of entrepreneurial well-being. The multilevel approach explicitly accounts for the hierarchical structure of individuals nested within countries, allowing for a clear distinction between within-country individual effects and between-country institutional influences (Snijders & Bosker 2012).

This study makes several contributions to the literature. Firstly, it advances entrepreneurship research by empirically demonstrating that entrepreneurs’ SWB cannot be fully understood without considering the institutional context in which entrepreneurial activity is embedded. Secondly, it contributes to the well-being literature by focusing on entrepreneurs as a distinct occupational group whose experiences differ substantially from those of salaried workers and the general population. Thirdly, from a methodological standpoint, the application of multilevel modelling offers robust empirical evidence on the joint role of micro- and macro-level determinants of SWB. Fourthly, the findings provide important policy implications by highlighting how institutional quality can foster not only entrepreneurial activity but also sustainable and psychologically supportive entrepreneurial ecosystems.

The remainder of the paper is structured as follows. The next section reviews the relevant theoretical foundations and develops testable hypotheses regarding the relationship between psychosocial and institutional factors and entrepreneurs’ SWB. This is followed by a description of the data and methodology. The empirical results are then presented and discussed in light of existing literature. The final section concludes by outlining key implications, limitations and directions for future research.

The present study set out to examine how psychosocial and institutional factors jointly shape entrepreneurs’ SWB by adopting a multilevel analytical perspective. By integrating individual-level psychosocial determinants with country-level institutional conditions, the findings provide a more comprehensive understanding of entrepreneurial well-being than approaches that focus on a single level of analysis. Overall, the results lend consistent empirical support to the proposed theoretical framework and highlight the importance of considering both micro- and macro-level influences.

These findings can be interpreted through the lens of institutional theory, which emphasises the role of formal and informal structures in shaping individual outcomes. In line with this perspective, the results suggest that supportive institutional environments enhance entrepreneurs’ SWB by reducing uncertainty and facilitating access to resources. Furthermore, from a well-being theory standpoint, the positive association between psychosocial factors and life satisfaction aligns with existing evidence that individual perceptions, social trust and economic security are key determinants of SWB.

Consistent with H1, the results indicate that psychosocial factors are strong and robust predictors of entrepreneurs’ SWB. Job satisfaction emerges as one of the most influential determinants, reinforcing the spillover hypothesis, which posits that satisfaction in the work domain significantly contributes to overall life satisfaction (Bowling et al. 2010). This finding aligns with prior research suggesting that autonomy, meaningful work and self-realisation – key features of entrepreneurial activity – play a central role in shaping entrepreneurs’ well-being (Brieger et al. 2021; Stephan 2018). The strong association between perceived financial situation and life satisfaction further underscores the relevance of subjective economic security, echoing evidence from the well-being literature that perceptions of financial adequacy often matter more than objective income levels (Diener et al. 2010; Ng & Diener 2014).

The positive effects of optimism, social trust and self-assessed health highlight the broader psychosocial foundations of entrepreneurial well-being. Optimism appears to function as a psychological resource that enhances resilience and adaptive coping in uncertain entrepreneurial environments, consistent with prior findings in psychology and entrepreneurship research (Carver & Scheier 2014; Nikolaev et al. 2019). Similarly, generalised trust reflects the importance of social capital in reducing uncertainty and facilitating cooperation, which is particularly salient for entrepreneurs who rely heavily on informal networks and relational exchanges. The strong association between health and SWB further emphasises that entrepreneurial success and sustainability are closely intertwined with physical and psychological functioning.

In line with H2, the results demonstrate that institutional quality plays a significant role in shaping entrepreneurs’ SWB. Political stability and business freedom are positively associated with life satisfaction, suggesting that predictable governance environments and supportive regulatory frameworks reduce uncertainty and enable entrepreneurs to focus on opportunity recognition and growth rather than risk mitigation. These findings are consistent with institutional economics perspectives, which emphasise the role of stable and efficient institutions in fostering both economic performance and individual well-being (Frey & Stutzer 2000; Fritsch et al. 2019). The negative association between corruption and SWB further corroborates evidence that weak governance and informal costs undermine trust, increase stress and adversely affect entrepreneurial experiences (Anokhin & Schulze 2009).

These findings are consistent with recent studies highlighting the role of institutional context in shaping entrepreneurial outcomes (Bennett & Nikolaev 2021; Kautonen, Kibler & Minniti 2023).

Importantly, the multilevel results provide support for H3, indicating that entrepreneurs’ SWB varies systematically across institutional contexts. The predicted probabilities illustrated in Figure 1 suggest that the benefits of psychosocial resources are not uniform across countries but are conditioned by the broader institutional environment. This finding reinforces the argument that entrepreneurial well-being is inherently contextual and that individual-level characteristics alone are insufficient to fully explain cross-national differences. From a theoretical standpoint, this result strengthens the integration of self-determination theory and institutional theory by demonstrating how psychological needs and institutional conditions jointly shape well-being outcomes.

Taken together, these findings contribute to several strands of literature. Firstly, they advance entrepreneurship research by shifting the focus beyond performance-oriented outcomes and highlighting entrepreneurs’ well-being as a critical dimension of sustainable entrepreneurship. Secondly, they enrich the well-being literature by explicitly incorporating institutional context into the analysis of a distinct occupational group. Thirdly, the study demonstrates the analytical value of multilevel modelling in capturing the nested structure of entrepreneurial experiences and avoiding overly reductionist explanations.

From a policy perspective, the results suggest that efforts to promote entrepreneurship should not be limited to encouraging business creation or growth but should also aim to improve the quality of the institutional environment in which entrepreneurs operate. Policies that enhance regulatory efficiency, strengthen governance and reduce corruption may contribute not only to higher entrepreneurial activity but also to greater SWB among entrepreneurs, thereby fostering more sustainable and resilient entrepreneurial ecosystems.