The aim of our research is to empirically evaluate and analyse the effects of quality of institutions on the level of early-stage entrepreneurial activity, but also the effects on the motivation of individuals to start new businesses and thus to enter into entrepreneurship. Our research focuses on member countries of the European Union, using panel data estimation techniques and targets a period of fifteen years, between 2002 and 2016. The results of our study show that, the level of the total early-stage entrepreneurial activity can be significantly affected by the quality of institutions, and the impact of institutional factors is different depending on the types of entrepreneurial activities analysed. The findings of the study confirm previous findings showing that the economic freedom and the quality of governance are significant predictors of entrepreneurial activity but also of individuals’ motivation to start a business. The results of our empirical investigation could be of interest to policymakers, who should be concerned about identifying and implementing the most appropriate measures to increase the quality of institutions, which should lead to the promotion of entrepreneurship and the development of entrepreneurial activities within a country.