Uncertainty avoidance and the rate of business ownership across 21 OECD countries, 1976–2004

Persistent differences in the level of business ownership across countries have attracted the attention of scientific as well as political debate. Cultural as well as economic influences are assumed to play a role. This paper deals with the influence of cultural attitudes towards uncertainty on the rate of business ownership across 21 OECD countries. First, the concepts of uncertainty and risk are elaborated, as well as their relevance for entrepreneurship. An occupational choice model is introduced to underpin our reasoning at the macro-level. Second, regression analysis using pooled macro data for 1976, 1990 and 2004 and controlling for several economic variables, yields evidence that uncertainty avoidance is positively correlated with the prevalence of business ownership. According to our model, a restrictive climate of large organizations in high uncertainty avoidance countries pushes individuals striving for autonomy towards self-employment. Regressions for these 3 years separately show that in 2004, this positive correlation is no longer found, indicating that a compensating pull of entrepreneurship in countries with low uncertainty avoidance may have gained momentum in recent years. Third, an interaction term between uncertainty avoidance and GDP per capita in the pooled panel regressions shows that the historical negative relationship between GDP per capita and the level of business ownership is substantially weaker for countries with lower uncertainty avoidance. This suggests that rising opportunity costs of self-employment play a less important role in this cultural environment, or are being compensated by increasing entrepreneurial opportunities.

Entrepreneurship and its determinants in a cross-country setting

The relative stability of differences in entrepreneurial activity across countries suggests that other than economic factors are at play. The present paper offers some new thoughts about the determinants of entrepreneurial attitudes and activities by testing the relationship between institutional variables and cross-country differences in the preferences for self-employment as well as in actual self-employment. Data of the 25 member states of the European Union as well as the US are used. The results show that country specific (cultural) variables seem to explain the preference for entrepreneurship, but cannot explain actual entrepreneurship. The present paper also introduces the remaining four papers of the special issue of the Journal of Evolutionary Economics, which center around the theme Entrepreneurship and Culture.

The persistence of regional new business formation-activity over time – assessing the potential of policy promotion programs

We investigate regional differences in the level and the development of regional new business formation activity. There is a pronounced variance of start-up rates across the regions. The level of regional new business formation is rather path-dependent so that changes are relatively small. The main factors determining the level of regional start-ups are innovation and an entrepreneurial climate. These factors also seem to be responsible for changes in the level of regional new business formation. In addition, unemployment plays a role. Steering innovation and creating an entrepreneurial atmosphere could be an appropriate starting point for policy measures that try to promote start-ups. Our empirical evidence strongly suggests that such measures may have significant effect only in the long run.

Entrepreneurial culture,regional innovativeness and economic growth

In this paper, we empirically study the relationship between entrepreneurial culture and economic growth. Based on a micro based comparison of entrepreneurs and non-entrepreneurs, we develop a measure reflecting entrepreneurial attitude at the regional level. We subsequently relate this newly developed variable, ‘entrepreneurial culture,’ to innovativeness and economic growth in 54 European regions. Extensive robustness analysis suggests that differences in economic growth in Europe can be explained by differences in entrepreneurial culture, albeit mostly in an indirect way.

Monetary policy as bad medicine: The volatile relationship between business cycles and asset prices

Austrian business cycle theory has become an important point of focus in controversial mainstream discussions regarding the role of asset prices in monetary policy. In this article, the relation between asset prices and the Austrian business cycle theory is examined. The analysis focuses on how central banking supports optimism, resulting in the redirection of entrepreneurial activity and knowledge via asset price bubbles. The crucial role of credit expansion for asset price booms is also analyzed. Following this analysis, the implications for monetary policy are deduced.

Austrian business cycle theory: Empirical evidence

The Austrian approach to business cycles has been seldom examined in econometric terms. This paper first reviews the essentials of that approach and the recent application of the Austrian business cycle theory in the economics literature. Quarterly data for Germany, USA, England and France, 1980:1 through 2006:1, are used to explore business cycle facts and relations between terms structure of interest rates, relative prices, composition of aggregate expenditure and real GDP. Results are consistent with the hypothesis of the Austrian business cycle theory that monetary policy shocks explain cycles. The changes in term structure of interest rates and composition of aggregate expenditure are large enough to explain changes in aggregate economic activity.

Freedom,barriers to entry,entrepreneurship, and economic progress

While entrepreneurs benefit from unrestricted free entry into markets, they have a time-inconsistent incentive to lobby for government entry restrictions once they become successful. Bad political institutions yield to these demands, and growing barriers are placed on domestic and international competition. Good institutions do not, and this effort is instead channeled toward further wealth creation. We find that productive entrepreneurship depends on both the freedom to succeed and discipline of failure that free markets provide. Trade barriers result in fewer combinations of goods and inputs attempted, and less productive entrepreneurial resource use. We also provide evidence on the value of business failure.

Export variety and the economic performance of countries

We explore the relationship between export variety and economic development, using data on OECD countries between 1964 and 2003. We show that structural change in the world economy has a particular arrow of time leading to a growing variety of exports. Distinguishing between related variety (within sectors) and unrelated variety (variety between sectors), we also show that related variety stimulates growth instantaneously, while unrelated variety only promotes growth with a considerable time lag. This finding is in line with the evolutionary notions that economic development and international trade patterns are path dependent.

Unemployment disparities and regional wage flexibility: comparing EU members and EU-accession countries

This paper provides empirical evidence on regional labor market flexibility in Europe and, in particular, in the EU-accession countries in Central and Eastern Europe. Whereas substantial regional disparities in unemployment are found for pre-accession EU member countries as well as for accession countries, an empirical analysis taking account of spatial effects shows that regional wage flexibility is significantly higher for accession countries. Moreover, unemployment disparities are found to be less persistent in the accession countries.

The curious destiny of a heterodoxy: The Austrian economic tradition

The Austrian School has had a curious destiny: while contributing many concepts to contemporary economic theory, it is either ignored or criticised by much of modern economic literature. This article discusses possible reasons for this institutional sidelining and the main futures of a renewal of Austrian thought.