How can entrepreneurship and educational capital lead to environmental sustainability?

• Complementarity between entrepreneurship and educational capital in reducing CO 2 emissions is examined. • The four types of entrepreneurship increase the level carbon emissions (CO) in developing countries. • Necessity and informal entrepreneurship have the highest contribution to CO. • Education capital can be used to reduce the negative effect of necessity and opportunity entrepreneurship on CO. • Education capital can be used to reduce the negative effect of formal and informal entrepreneurship on CO. This inquiry extends previous literature by assessing the role of educational capital (educational levels and government spending on education) in modulating the negative impact of different types of entrepreneurship on environmental quality for 32 developing economies. Four different types of entrepreneurship are included in the analysis, namely: opportunity entrepreneurship, necessity entrepreneurship, formal entrepreneurship, and informal entrepreneurship. The followings are the main findings provided by the system Generalized Method of Moments (Sys-GMM): (i) all the four types of entrepreneurship increase carbon emissions; (ii) necessity and informal entrepreneurship have the highest contribution to carbon emissions compared to opportunity and formal entrepreneurship; (iii) the conditional impact of educational capital, particularly tertiary education and government expenditure on education, reduces carbon emissions in the models pertaining to opportunity and necessity entrepreneurship; however, only tertiary education reduces carbon emissions in the models pertaining to formal and informal entrepreneurship; (iv) the net impacts on carbon emissions from the complementarity between educational capital and both opportunity and necessity entrepreneurship are negative and significant only for the tertiary education and government expenditure in education, indicating that these later can be used to modulate the negative impact of opportunity and necessity entrepreneurship on environmental quality; (v) the net impacts on carbon emissions from the complementarity between educational capital and both formal and informal entrepreneurship is negative and significant only for the tertiary education, meaning that this later can be used to modulate the negative impact of formal and informal entrepreneurship on environmental quality. Contributions to the theoretical and empirical literature, implications to policymakers and practitioners, and future research directions are also discussed. [ABSTRACT FROM AUTHOR]