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This paper takes an institutional approach to explaining differences in the levels of entrepreneurship and economic growth across U.S. states. The institutional approach to growth argues that political and economic institutions influence the productivity of resource use. We hypothesize that institutions influence economic growth primarily through their effect on entrepreneurship and discovery. In this paper, we test the hypothesis that institutional quality is a determinant of regional differences in entrepreneurship and economic growth using data from the Economic Freedom of North America index to measure institutional quality.