The Republic has been rated one of the best countries in the world in which to start a business, level with the United States and ahead of Britain, Germany and France.
The State was placed 12th in a survey of 37 first- and second-world nations last year. One in 11 Irish adults owns or is attempting to establish a company, a study by the Global Entrepreneurship Monitor found.
Entrepreneurial activity slumped an average 25 per cent across all participating countries on 2001, evidence of the impact of the economic slowdown.
A gender imbalance was identified in Ireland, where only 34 per cent of new firms are established by women.
But the Government's pro-business strategy was singled out for praise. The survey ranked its investment policies first for efficiency and effectiveness, and fifth for regulatory functionality.
The Republic's infrastructure was judged eighth worst. The reluctance of colleges and universities to foster seed companies and a shortage of start-up capital was also highlighted.
Despite the sluggish economy, the findings suggest that Irish people are optimistic about future prospects - 39 per cent believe conditions to start new businesses will become more favourable in the next six months.
The report was hailed by the Tánaiste, Ms Harney, as evidence of the Republic's emerging status as a hotbed of innovation.
"Despite difficult times, Ireland remains a leading state for entrepreneurship, on a par with the US and Canada," she said.
Developing nations headed the rankings. Thailand was placed first, followed by India, Chile, Korea and Argentina. Iceland was the top-rated European state, trailed by Ireland, Norway and Switzerland.
The Global Entrepreneurship Monitor is co-ordinated jointly by the London Business School and Babson College, Massachusetts.
