Entrepreneurship and economic growth: Evidence from emerging and developed countries

This paper presents an extension to the economic growth model developed by Wong, Ho, and Autio (2005 Autio, E. 2005. 2005 report on high-expectation entrepreneurship, Toronto: GEM Consortium.  [Google Scholar]), to reflect differences in the economic effects of opportunity and necessity-based entrepreneurship in both emerging and developed countries. Data from 44 countries for the years 2004 and 2005, as collected by Global Entrepreneurship Monitor (GEM) research and Global Competitiveness Report (GCR) research, are used to identify predictors of GDP growth for emerging and developed nations. The GEM data are used to determine the effect of different types of entrepreneurship on GDP growth. The GCR data operationalize additional control variables suggested by three economic growth theories: new economic geography, endogenous growth theory and national systems of innovation. This contribution to the literature suggests that, in developed countries, a significant portion of economic growth rates can be attributed to high-expectation entrepreneurs exploiting national investments in knowledge creation and regulatory freedom. However, in emerging countries this effect is absent. It is hypothesized that a threshold exists for entrepreneurs to gain access to the formal economy, below which entrepreneurial contributions act through informal mechanisms.     

Reconceptualizing entrepreneurial framework conditions

This report is an empirical examination of entrepreneurial framework conditions—the environmental conditions that encourage and support entrepreneurial activity at the national level. In particular, it attempts to validate the framework conditions employed in the Global Entrepreneurship Monitor (GEM), a multi-year, multinational study of entrepreneurial activity widely used in entrepreneurship research. The validity of the GEM entrepreneurial framework conditions is examined using empirical analysis of data drawn from Global Competitiveness Report measures for 53 countries over 4 years. The data suggest an alternative conceptualization of entrepreneurial framework conditions: commercial munificence, technology openness, regulatory openness, and technology influx. These findings have implications for theorists and policy makers interested in antecedents to entrepreneurially based economic growth.     

Competitiveness and entrepreneurship rate in Europe during the economic recovery phase, 2012–2016

Entrepreneurship is key for regional economic development. Regions can offer conditions that promote or limit business innovation activity. As the World Economic Forum points out, promotion and entrepreneurship support have been key factors for European countries to recover lost competitiveness. This study analyzes countries’ competitiveness level during the economic recovery phase using data from the Global Entrepreneurship Monitor (GEM) and the Word Economic Forum Report for the 2012–2016 period. The sample comprises 19 countries of the European Union. The independent variable is Total Entrepreneurship Activity rate (TEA) and the dependent variables are the 12 pillars that measure competitiveness in the GEC Index. The results show that, over time, the macroeconomic environment conditions necessity entrepreneurship but, when the economy recovers, innovation determines the appearance of opportunity entrepreneurship. Differences between countries are less significant regarding entrepreneurial activity and competitiveness; however, patterns for northern and southern Europe still differ.

     

Necessity entrepreneurship in Latin America: it´s not that simple

ABSTRACT

Entrepreneurship literature takes for granted the motivation dichotomy; however, this simplistic view have been criticised for several studies because it likely does an injustice to entrepreneurs, particularly Latin America (LA) entrepreneurs. This study seeks to contribute to the body of knowledge on entrepreneurs to better explain the process of entrepreneurs being motivated by necessity. We use the Global Entrepreneurship Monitor (GEM) database for LA countries and develop an econometric model based on a set of variables, including contextual variables. First, we identify three types of entrepreneurial motivation: necessity, opportunity and transition. We then demonstrate that the motivation dichotomy does not represent LA entrepreneurship. Second, we find that necessity-driven entrepreneurship does not necessarily indicate the absence of high growth aspirations because some entrepreneurs in this category have such aspirations. Third, we observe that significant differences exist among entrepreneurs based on context, specifically among necessity-driven entrepreneurs. These findings have practical implications for research on entrepreneurship and for regional development.     

Entrepreneurship and regional dynamics: the case of Chile

ABSTRACT

During the last 20 years, social and political consensus has afforded the successful gradual implementation of entrepreneurship policy in Chile, transforming the country into one of the world’s most productive entrepreneurship ecosystems. However, the excessive political and economic centralization that has characterized Chile raises the question of whether spatial dependence influences entrepreneurship and what factors have led to this condition. By applying spatial econometric tools to data from 320 districts in Chile during the period 2013–2014, we conclude that there is spatial dependence among districts in Chile in relation to the creation of new businesses and that the immigrant population, the presence of different categories of universities and local patenting capacity are the variables with the greatest positive effect on this dependence.     

Deirdre Mccloskey,Kirznerian Growth and The Role of Social Networks

This article expands on the view of Deirdre McCloskey that the economic growth of the Western world since the end of the eighteenth century can be explained by the process of entrepreneurial change as expounded by Israel Kirzner. This article argues that while Kirzner's approach to economic development is indeed fruitful, it should be augmented through the study of social networks, which McCloskey has largely ignored. When social networks are seen in the light of the Kirznerian process of entrepreneurship, they represent an important institution that relays information about the proper identification and perception of opportunities.     

Impact of high‐growth start‐ups on entrepreneurial environment based on the level of national economic development

In this paper, we examine the relationship between the conditions of the entrepreneurial environment and high‐potential entrepreneurship according to the stage of economic development of the country. A structural equation model was designed based on data from the Global Entrepreneurship Monitor project, which contains information about 62 countries. Our results suggest that economic development and high‐potential entrepreneurship have a greater impact on the entrepreneurial ecosystem than entrepreneurial activity in general—with special effects on government programs, R&D transfer, and access to the domestic market. Notably, the level of influence of sustainable economic development and high‐potential entrepreneurship depends on the level of economic development of the country.     

The value of entrepreneurship by gender on regional behaviour

This paper examines how the value of entrepreneurship by gender is related to regional behaviour. Researchers have traditionally defined entrepreneurial organization as separate to gender and to economic growth. Using the Global Entrepreneurship Monitor (GEM) we complete a dataset of 50 countries using variables such as total early-stage entrepreneurial activity (TEA) and opportunity-driven entrepreneurial activity (OPP). The methodology used proposes an analysis of regional convergence, comparing the evolution over time of both the rate of entrepreneurial activity and the ratios of opportunity-driven and need-driven entrepreneurial activity, distinguishing by gender. On the other hand, a regression model is proposed that explains the greater presence of female entrepreneurship. The results show that entrepreneurship by gender is an important factor to define different cluster of countries according to how men and women entrepreneurs create new economic opportunities.

     

Legal institutions and high-growth aspiration entrepreneurship

Entrepreneurship is crucial for economic growth, yet comparatively little research has examined the relationship between institutions and new firm formation. I test the impact of property rights institutions and contracting institutions on high-growth-aspiration (HGA) entrants using the Global Entrepreneurship Monitor (GEM) survey data for 2000-2005. I find that property rights are more significant for profound market expansion and rule of law is more significant for high job growth. The number of procedures to enforce a contract, the number of procedures to start a business, and the number of days to start a business are negatively correlated with all types of HGA entrepreneurship. A common law legal system is negatively correlated with entrepreneurship combining high job growth and market expansion. These findings add nuance to prior studies that tout the importance of property rights and rule of law for entrepreneurship.     

Drivers of entrepreneurial aspirations at the country level: the role of start-up motivations and social security

This paper investigates whether various start-up motivations and a country’s level of social security can explain the prevalence of entrepreneurial aspirations. For entrepreneurial aspirations and motivations we use country-level data from the Global Entrepreneurship Monitor (GEM) for the year 2005. We distinguish between the necessity motive, independence motive and increase wealth motive and between aspirations in terms of innovativeness, job growth and export orientation. Our findings indicate that social security negatively affects a country’s supply of ambitious entrepreneurship. Our results also suggest that entrepreneurial aspirations in terms of job growth and export relate positively to the increase wealth motive.     

Quantifying the relationship between entrepreneurship and competitiveness development stages in Latin America

This research aims to quantify the importance of a country??s entrepreneurship level in terms of its competitiveness rates. Our hypothesis is that those countries entrepreneurship growth rates increase their competitiveness indicators and that this entrepreneurial improvement could be a key factor in reaching the next stage of development. We establish this relationship using a longitudinal database of Latin American countries that participated in the Global Entrepreneurship Monitor (GEM) and the Global Competitiveness Reports of the World Economic Forum (WEF) from 2001 to 2006. GEM and WEF construct aggregated indexes using several variables to rate each country??s entrepreneurship activity and competitiveness development. We use a discriminant analysis to identify various countries?? competitiveness subgroups and show how each country??s entrepreneurship rates have weight in different stages of competitiveness, placing a special emphasis on Latin America. Our results suggest that Latin American countries need to gain entrepreneurial dynamics and economic (and competitiveness) development by transforming their typical self-employment or low value-added new ventures for local markets into strong, innovative networked firms competing globally. Some management and policy implications are also discussed.     

Gender analysis of entrepreneurial intentions as a function of economic development across three groups of countries

The aim of this paper is to analyze the gender differences in entrepreneurial intentions by studying a range of socioeconomic and psychosocial factors. Furthermore, we aim at analyzing these differences in three groups of countries depending on the stage of economic development of each country according to the Global Competitiveness Report. Using a logistic regression analysis and data from the 2008 APS (Adult Population Survey) database which is part of the Project GEM (Global Entrepreneurship Monitor), results show the existence of gender differences in entrepreneurial intentions. The model proposed in the study has decreasing explanatory power as the degree of economic development increases, and is also more conclusive for men than women. An important methodological innovation we implemented in the current study is the use of the variable gender as a dependent variable rather than a variable of a socio demographic nature.     

The role of a firm's absorptive capacity and the technology transfer process in clusters: How effective are technology centres in low-tech clusters?

Due to its unique political institutions and good economic track record, Switzerland used to be called a special case. This paper investigates the start-up propensities in this country based on the individual data of the adult population survey of the Global Entrepreneurship Monitor. The focus is on the factors that are distinctive for Switzerland: language differences and differences in taxes on corporate profit and personal income. There are substantial entrepreneurship disparities among the language areas of Switzerland. Still, I do not find evidence for a cultural influence. The different start-up propensities in the three language areas can be explained by structural characteristics of the regional economy. The same applies to differences in income and profit taxes. If other regional factors are taken into account, I do not find evidence for a direct influence of taxes on the entrepreneurial propensity of the inhabitants of Swiss regions. There is however some evidence for indirect effects. This paper adds to our understanding of the effects of culture and tax differences on entrepreneurship.     

Entrepreneurship,income distribution and economic growth

Traditionally different factors and variables have been considered in the economic growth models. Following Solow’s model, economists considered physical capital and technology during 1950s–1980s. With the introduction of endogenous growth models, new forms of capital were introduced in the production function; human capital, public capital and more recently social capital. However, the consideration of qualitative variables is necessary to improve the economic growth analysis. The improvement of statistical information has favored their introduction in the economic growth models. Recently, “entrepreneurship” concept has been considered in this type of analysis. Entrepreneurship considers the capacity and ability to create new business and production activity. It is an activity not an occupation. Some authors like Schumpeter have included it in their models and they have analysed its effects on economic growth. But it is also necessary to include the role of social climate, that in a schumpterian way it could be represented by income distribution. The main objective of the paper is to analyze the relationship between entrepreneurship, income distribution and economic growth following the ideas developed by Schumpeter and we will contrast them from a empirical analysis using the GEM (Global Entrepreneurship Monitor) data.     

Entrepreneurship and Innovation at the Base of the Pyramid: A Recipe for Inclusive Growth or Social Exclusion?

Policy makers often see entrepreneurship as a panacea for inclusive growth in underdeveloped ‘Base of the Pyramid’ (BOP) regions, but it may also lead to unanticipated negative outcomes such as crime and social exclusion. Our objective is to improve the understanding of how entrepreneurship policies can lead to socially inclusive growth at the BOP. Drawing on data collected from Brazilian tourism destinations with varying entrepreneurship, innovation, and social inclusion policies, we argue that weak institutions coupled with alert entrepreneurs encourage destructive outcomes, especially if entrepreneurship policies are based solely on economic indicators. Policies addressing both economic and social perspectives may foster more productive entrepreneurial outcomes, albeit at a more constrained economic pace. The study extends the related BOP, entrepreneurship, global value chain, and sustainable tourism literatures by examining the poor as entrepreneurs, the role of local innovation, and how entrepreneurship policies generate different social impacts within poor communities.     

Entrepreneurship and economic freedom: cross-country evidence from formal and informal sectors

Abstract

The paper empirically examines the effect of economic freedom on the average prevalence of formal and informal entrepreneurship. Whereas the formal entrepreneurship and economic freedom nexus has been studied, the influence of economic freedom on informal entrepreneurship is less forthcoming. The results, based on cross-country data and after accounting for possible reverse causality, show that economic freedom promotes formal entrepreneurship and inhibits informal entrepreneurship. Furthermore, the return from economic freedom is greatest in countries with a relatively higher prevalence of formal and informal entrepreneurship.     

Inbound foreign direct investment and domestic entrepreneurial activity

There is an interesting and lively debate going on in the academic literature intersecting trade policy and entrepreneurship. Several studies have shown that inbound foreign direct investment (FDI) has a negative effect on rates of entrepreneurship, while others find the opposite – a higher rate of new firm creation associated with increased inbound FDI. We study the phenomenon using a cross-country analysis of data on entrepreneurs from 38 countries and from 2001 to ? 2008. Results indicate that inbound FDI has negative associations with five types of entrepreneurship (nascent, new, early-stage, established, and high-growth) measured by the Global Entrepreneurship Monitor survey. In our discussion, we argue that our study supports the contention that studies counting new limited liability company registrations do not always measure the same thing as entrepreneurial entries (self-reports), leading to different, even opposite results when subjected to empirical analysis.     

Does Monetary Aid Catalyse New Business Creation? Analysing the Impact of Global Aid Flows on Formal and Informal Entrepreneurship

Official development aid – monetary transfers to developing countries to promote social and economic development – reached more than $140 billion in 2016. However, traditional forms of government bilateral aid continue to decline, while private aid is rising. Nevertheless, the impact of this aid, including its potential to stimulate economic development through new business formation, remains uncertain. In this study, we examine the impact of three sources of monetary aid flows on formal and informal entrepreneurship. Drawing from the international political economy literature we argue that bilateral aid and private aid are associated with higher levels of informal entrepreneurship, while multilateral aid is accompanied by lower levels. Moreover, we show that bilateral and private aid are linked with lower levels of formal entrepreneurship, while multilateral aid has no impact. The analyses of a panel of 313 observations from 49 countries provide robust support for these arguments.     

Balancing dual missions for social venture growth: a comparative case study

ABSTRACT

Balancing social and economic missions in the pursuit of growth is one of the greatest challenges faced by social ventures. Although social ventures strive for growth to scale their social impact, pursuing growth often results in mission drift and the sacrifice of social objectives, which in turn eventually undermine the ventures’ raison d’être. In this study, we investigate how and with what outcomes social ventures that pursue growth can manage the balance of social and economic missions. Through a comparative case study of six for-profit social ventures, we find significant differences in how dual missions are selected, connected, and intertwined, leading to varying degrees of mission spillover effects between social and economic missions. Our findings show that two-sided mission spillover effects are a central mechanism in dual mission management, enabling social ventures to pursue balanced growth, avoid mission drift, and achieve social impact. With these findings, this study adds to the emergent literature on social entrepreneurship, dual mission management, and social venture growth.     

The role of regions for different forms of business organizations

Abstract

The evidence for associations between area characteristics and entrepreneurship is fairly consistent in most studies. These studies, however, have disregarded the fact that the areas might be constructs that have no effect on the individual differences in entrepreneurship and, furthermore, have conflated entrepreneurship and sole proprietorship, disregarding the impact of area constructs on different forms of business organizations. Therefore, we investigate and quantify, within a multi-level framework, the importance of municipalities and regions for understanding individual differences in entrepreneurship and self employment (defined as sole proprietorship). By using register data comprising the entire Swedish population for 2000–2010, we decompose the variation for the respective form of business organization into three levels: the individual, the municipality and the region. Our results show that about 10% of the total variation in entrepreneurship can be attributed to the municipality and region level. The corresponding numbers for self employment are 3–4%. Our results indicate that regions and municipalities differ markedly in area impact for entrepreneurs compared to self employed. The results from the present study show the importance of taking into account the form of business organization in economic analysis, and they can be used when considering whether it is appropriate to focus on specific municipalities and regions for policy interventions on self-employment.