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Linking Entrepreneurship and Economic Growth

February 1999
Small Business Economics 13(1):27-55

February 1999
13(1):27-55

DOI:10.1023/A:1008063200484

Source
RePEc

Authors:

Roy Thurik

Erasmus University Rotterdam

Sander Wennekers

Erasmus University Rotterdam

In the 1980s stagflation and high unemployment caused a renewed interest in supply side economics and in factors determining economic growth. Simultaneously, the 1980s and 1990s have seen a reevaluation of the role of small firms and a renewed attention for entrepreneurship. The goal of this survey is to synthesize disparate strands of literature to link entrepreneurship to economic growth. This will be done by investigating the relationship between entrepreneurship and economic growth using elements of various fields: historical views on entrepreneurship, macro-economic growth theory, industrial economics (Porter's competitive advantage of nations), evolutionary economics, history of economic growth (rise and fall of nations) and the management literature on large corporate organizations. Understanding the role of entrepreneurship in the process of economic growth requires the decomposition of the concept of entrepreneurship. A first part of our synthesis is to contribute to the understanding of the dimensions involved, while paying attention to the level of analysis (individual, firm and aggregate level). A second part is to gain insight in the causal links between these entrepreneurial dimensions and economic growth. A third part is to make suggestions for future empirical research into the relationship between (dimensions of) entrepreneurship and economic growth. Copyright 1999 by Kluwer Academic Publishers

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ABSTRACT. In the 1980s stagflation and high unemploy-

ment caused a renewed interest in supply side economics and

in factors determining economic growth. Simultaneously, the

1980s and 1990s have seen a reevaluation of the role of small

firms and a renewed attention for entrepreneurship. The goal

of this survey is to synthesize disparate strands of literature

to link entrepreneurship to economic growth. This will be done

by investigating the relationship between entrepreneurship and

economic growth using elements of various fields: historical

views on entrepreneurship, macro-economic growth theory,

industrial economics (Porter’s competitive advantage of

nations), evolutionary economics, history of economic growth

(rise and fall of nations) and the management literature on

large corporate organizations. Understanding the role of entre-

preneurship in the process of economic growth requires the

decomposition of the concept of entrepreneurship. A first part

of our synthesis is to contribute to the understanding of the

dimensions involved, while paying attention to the level of

analysis (individual, firm and aggregate level). A second part

is to gain insight in the causal links between these entrepre-

neurial dimensions and economic growth. A third part is to

make suggestions for future empirical research into the rela-

tionship between (dimensions of) entrepreneurship and

economic growth.

1. Introduction

Economic growth is a key issue both in economic

policy making and in economic research. In

Europe in particular, the interest in economic

growth is growing fast in view of the persistently

high rates of unemployment. In most OECD coun-

tries the first decades after World War II showed

historically high rates of economic growth.

Following the first oil crisis in 1973 a period of

stagflation set in, characterized by a combination

of inflation and slow growth. Since the mid-1980s

economic growth in some countries – such as the

Netherlands – has picked up again.

In the 1960s and 1970s academic and political

interest in many Western countries gradually

turned to matters of demand management and

income equality, whereas the interest in the causes

of economic growth waned. Neo-classical theory

explained economic growth by accumulation of

production factors and by exogenous technolog-

ical change. Mainstream economics however did

not show any substantial interest in the ultimate

causes underlying long-term factor accumulation

and technological development.

In the 1980s stagflation and high unemploy-

ment caused a renewed interest in supply side

economics and its underlying factors. As clearly

exposed by North and Thomas (1973), Olson

(1982) and more recently by Van de Klundert

(1997) the institutional foundations of an economy

are among the most prominent of these factors.

These authors focus attention on factors such as

incentives, regulation of markets and social rigidi-

ties. Somewhat understated in their analysis is the

primal role of the economic agents who link the

institutions at the micro level to the economic

outcome at the macro level. It remains veiled how

exactly institutions and cultural factors frame the

decisions of the millions of entrepreneurs in small

firms and of entrepreneurial managers working

within large companies. And little is known about

how these individuals materialize their decisions

into the kind of actions that aggregate into

economic growth. This directs our attention to two

related phenomena of the 1980s and 1990s: the

resurgence of small business and the revival of

entrepreneurship.

There is ample evidence that economic activity

moved away from large firms to small firms in the

Linking Entrepreneurship

Sander Wennekers

and Economic Growth Roy Thurik

Small Business Economics 13: 27–55, 1999.

 1999 Kluwer Academic Publishers. Printed in the Netherlands.

Final version accepted on February 22, 1999

EIM Small Business Research and Consultancy,

The Netherlands and Centre for

Advanced Small Business Economics (CASBEC),

Erasmus University Rotterdam,

The Netherlands

E-mail: awe@eim.nl

1970s and 1980s. The most impressive and also

the most cited is the share of the 500 largest

American firms, the so-called Fortune 500. Their

employment share dropped from 20 per cent in

1970 to 8.5 per cent in 1996 (Carlsson, 1992 and

1999). European data dealing with the size distri-

bution of firms were not available in a systematic

manner until recently. However, Eurostat has

begun publishing yearly summaries of the firm

size distribution of (potential) EU-members at the

two-digit level for the entire business sector. See

Eurostat (1994), for instance. The efforts of

Eurostat are supplemented by the European

Network for SME Research (ENSR), a coopera-

tion of 19 European institutes. This organization

publishes a yearly report on the structure and the

developments of the small business sectors in the

countries of the EU including Iceland, Norway,

Liechtenstein and Switzerland. See EIM

(1993/4/5/6/7). In its 1997 issue (EIM, 1997, p.

15) it is shown that small business employment

growth in Europe is in excess of that of their large

counterparts in the period 1988–1998.

Acs and Audretsch (1993) and Carlsson (1992)

provide evidence concerning manufacturing indus-

tries in countries in varying stages of economic

development. Carlsson advances two explanations

for the shift toward smallness. The first deals with

fundamental changes in the world economy from

the 1970s onwards. These changes relate to the

intensification of global competition, the increase

in the degree of uncertainty and the growth in

market fragmentation. The second deals with

changes in the character of technological progress.

He shows that flexible automation has various

effects resulting in a shift from large to smaller

firms. The pervasiveness of changes in the world

economy, and in the direction of technological

progress result in a structural shift affecting the

economies of all industrialized countries. Also

Piore and Sable (1984) argue that the instability

of markets in the 1970s resulted in the demise of

mass production and promoted flexible special-

ization. This fundamental change in the path of

technological development led to the occurrence

of vast diseconomies of scale.

This shift away from large firms is not confined

to manufacturing industries. Brock and Evans

(1989) show that this trend has been economy-

wide at least for the United States. They provide

four more reasons why this shift has occurred: the

increase of labor supply leading to lower real

wages and coinciding with an increasing level of

education; changes in consumer tastes; relaxation

of (entry) regulations and the fact that we are in

a period of creative destruction. Loveman and

Sengenberger (1991) stress the influence of two

trends of industrial restructuring: that of decen-

tralization and vertical disintegration and that of

the formation of new business communities. These

intermediate forms of market coordination flourish

owing to declining costs of transaction. Further-

more, they emphasize the role of public and

private policies promoting the small business

sector.

Audretsch and Thurik (1998) point at the

necessary shift towards the knowledge based

economy being the driving force behind the move

from large to smaller businesses. In their view

globalization and technological advancements

are the major determinants of this challenge of

the Western countries. See Loveman and

Sengenberger (1991), Acs et al. (1999) and Carree

et al. (1999) for a further documentation of indus-

trial changes and their causes.

The causes of this shift are one thing. Its con-

sequences cover a different area of research. Acs

(1992) has discussed them. He distinguishes four

consequences of the increased importance of small

firms: entrepreneurship, routes of innovation,

industry dynamics and job generation. His claims

are that small firms play an important role in the

economy serving as agents of change by their

entrepreneurial activity, being the source of con-

siderable innovative activity, stimulating industry

evolution and creating an important share of the

newly generated jobs. Baumol (1993a) amply

deals with the role of entrepreneurial activities and

the different effects it may have. The role of small-

ness in the process of innovative activities is

investigated extensively in Acs and Audretsch

(1990) and Audretsch (1995). The discussion of

the relation between the role of small firms and

industry dynamics is spread out: examples can be

found in Audretsch (1993, 1995). Cohen and

Klepper (1992) zoom in on the role of number of

firms and diversity for obtaining progress. The

role of small firms in the job creation process is

controversial.

Clearly, there are many more consequences of

the increased share of small firms than the four

Sander Wennekers and Roy Thurik

mentioned by Acs (1992). For instance, an

increase in the share of small firms may lead,

ceteris paribus, to a lower orientation towards

exports, a lower propensity to export employment,

a qualitative change in the demand for capital and

consultancy inputs, more variety in the supply of

products and services or in the manner and aims

of conducting research and development. The

literature of the consequences of smallness is com-

plemented by some empirical exercises by Thurik

(1996) and Carree and Thurik (1998 and 1999) for

some European countries. They show that a rise

in the share of smallness in a certain economy,

respectively a high share of smallness in a certain

industry generates additional output in the entire

economy, respectively industry. Schmitz (1989)

provides a theoretical model with a similar result.

Audretsch and Thurik (1999) show that an

increase of the rate of entrepreneurship (number

of business owners per labor force) leads to lower

levels of unemployment in 23 OECD countries in

the period 1984 through 1994.

The reevaluation of the role of small firms is

related to a renewed attention to the role of entre-

preneurship. If the size class distribution has an

influence on growth, it must be differences in

organization that matter. The major difference

between the organization of a large firm and a

small one is the role of ownership and manage-

ment. In a small firm usually there is one person

or a very small group of persons which is in

control and which shapes the firm and its future.

The role of such a person is often described with

the term “entrepreneurship”.

In recent years renewed attention has been

given to the role of entrepreneurship in economic

development. This is related to the aforementioned

shift to supply side economics. Many economists

and politicians now have an intuition that there is

a positive impact of entrepreneurship on the

growth of GDP and employment. Furthermore,

many stress the role of the entrepreneur in imple-

menting innovations. This renewed interest of

politicians and professional economists coincides

with a revival of entrepreneurship rates in most,

though not in all, Western economies.

A related question is whether small firms and

entrepreneurship are synonymous. We will argue

that this is not the case.

Small firms certainly are

a vehicle in which entrepreneurship thrives. There

are more such vehicles, for instance business units

within large companies. Clearly, this broader

interpretation of entrepreneurship implies mea-

surement difficulties.

“Small business has to save us” is a slogan

often heard from European politicians and repre-

sentatives of social and institutional groups. They

fear for a further rise of the already unacceptably

high level of unemployment caused by the sheer

endless series of efficiency and cost-cutting

operations of the public and large business sectors.

They seek salvation with the residual sector, being

the small business sector. They hope that stimu-

lating smallness can fight unemployment. There is

probably some truth in their hopes and slogans.

The literature cited above points decisively it this

direction. However, there are more ways for entre-

preneurship to contribute to growth than through

small firms. Recent studies on the role of compe-

tition (Nickell, 1996), of deregulation (Koedijk

and Kremers, 1996) and of the nature of innova-

tion (Cohen and Klepper, 1996) support this view.

The objective of this article is to synthesize

disparate strands of literature in order to link

entrepreneurship to economic growth. This will be

done by investigating the relationship between

entrepreneurship and economic growth in the

following fields: historical views on entrepre-

neurship, macro-economic growth theory, indus-

trial economics (Porter’s competitive advantage of

nations), evolutionary economics, history of

economic growth (rise and fall of nations) and the

management literature on large organizations. This

last body of literature is taken into account

because management techniques within large orga-

nizations have tried to learn from their smaller

counterparts. This led to a wave of downsizing,

the creation of business units, forms of intrapre-

neurship, etc. Furthermore, as we have argued

above, our approach to entrepreneurship will not

be confined to its role in the arena of small firms.

Entrepreneurship is an ill-defined, at best

multidimensional, concept. Understanding its role

in the process of growth requires the decomposi-

tion of the concept of entrepreneurship. A

first

goal of this paper is to contribute to the under-

standing of the dimensions involved, while paying

attention to the level of analysis (individual, firm

and aggregate level). A

second goal is to provide

insight in the causal links between these entre-

Linking Entrepreneurship and Economic Growth 29

preneurial dimensions and economic growth.

These insights, however valuable, are not a goal

in itself but should be viewed in a broader frame-

work. Empirical research of the role of entrepre-

neurship as a driving force of economic

development still is not well developed. Therefore,

third goal of our paper is to suggest ways in

which to measure entrepreneurship and to suggest

ways in which the relationship between dimen-

sions of entrepreneurship and growth might be

empirically investigated. This might shed light on

the way the capitalist market engine works.

The preliminary framework of this article is

given in Figure 1. This framework is adopted

because there is not usually a direct link between

entrepreneurship and economic growth. And

secondly, entrepreneurship is an ill-defined

concept. That is why we need

intermediate vari-

ables

or linkages to explain how entrepreneurship

influences economic growth. Examples of these

intermediate variables are innovation, and entry

and exit of firms (competition). We will also

attempt to provide some

conditions for entrepre-

neurship. This is done for several reasons. First

personal traits lie at the origin of entrepreneurship.

Furthermore, both entrepreneurship and the inter-

mediate linkages may depend upon underlying

cultural and institutional conditions. The relevance

of these conditions will be looked into in some

detail. Finally, the possibility of feedbacks will

be considered.

This article is structured as follows. In section

2 introductory remarks will be made on current

and historical views on entrepreneurship. This

section also contains a part on the explanation of

the disappearance of entrepreneurship from

economic theory during the post war period, and

closes with the explanation of the revival of

interest in entrepreneurship since the 1980s.

Section 3 is concerned with understanding

economic growth. First, the significance of the

rejuvenation of macro-economic growth theory for

entrepreneurship research will be examined. This

theory focuses on the importance of (human)

capital formation and innovation. Next, some

seminal literature in the field of economic history,

in particular concerning the rise and decline of

nations, is discussed in order to search for the

underlying causes of economic growth such as the

cultural setting, legal framework and entrepre-

neurial activity. In a final section some modern

views regarding economic growth, as formulated

in industrial economics and in evolutionary eco-

nomics are considered. Section 4 focuses on the

role of entrepreneurship, downsizing and intrapre-

neurship within large organizations. Section 5

attempts to bring it all together. Some conclusions

will be drawn from the literature research reported

in sections 2 through 4, viewed through the frame-

work as it has developed in the course of our

investigations. This section also presents proposals

for further research.

2. Economic literature on entrepreneurship

In section 2.1 we will give an introduction to the

historical views of economists on entrepreneur-

ship, particularly by summarizing Hébert and Link

(1989) which again is a summary of Hébert and

Link (1982). In section 2.2 we will describe the

disappearance and the revival of the interest in

entrepreneurship. In section 2.3 we will expand on

two main aspects of entrepreneurship: start-ups

and innovation.

2.1.

Historical views on entrepreneurship

Throughout intellectual history, the entrepreneur

has worn many faces and fulfilled many roles. At

least thirteen distinct roles for the entrepreneur can

be identified in the economic literature (Hébert

Sander Wennekers and Roy Thurik

Figure 1. Preliminary framework.

and Link, 1989, but also Van Dijk and Thurik,

1995 and Van Praag, 1996):

01. The person who assumes the risk associated

with uncertainty.

02. The supplier of financial capital.

03. An innovator.

04. A decision-maker.

05. An industrial leader.

06. A manager or a superintendent.

07. An organizer and coordinator of economic

resources.

08. The owner of an enterprise.

09. An employer of factors of production.

10. A contractor.

11. An arbitrageur.

12. An allocator of resources among alternative

uses.

13. The person who realizes a start-up of a new

business.

Once we focus on the dynamic role of the entre-

preneur – a role most directly linked with change

and growth, implied in statements 1, 3, 4, 5, 7, 10,

11, 12, and 13 – the taxonomy of entrepreneurial

theories can be condensed into three major intel-

lectual traditions, each tracing its origin to Richard

Cantillon (Hébert and Link, 1989). The first is the

German tradition of von Thünen, Schumpeter and

Baumol, the second the (neo-)classical tradition of

Marshall, Knight and Schultz and the third the

Austrian tradition of Menger, von Mises, and

Kirzner. These traditions share a heritage and

common language but they point at different

aspects of the function of the entrepreneur. Repre-

senting differences in style and emphasis, they can

be summarized as follows. The (neo-)classicals

stress the role of the entrepreneur in leading

markets to equilibrium through their entrepre-

neurial activities. The Austrians concentrate on the

abilities of the entrepreneur to perceive profit

opportunities, usually after some exogenous

shock. The “Austrian” entrepreneur combines

resources to fulfill currently unsatisfied needs or

to improve market inefficiencies or deficiencies.

In the German or Schumpeterian tradition econo-

mists concentrate on the entrepreneur as a creator

of instability and creative destruction. The differ-

ence between the German (Schumpeterian) and

Austrian tradition can be summarized as follows:

“The creation of potential may be seen as

Schumpeterian and its realization as Austrian”

(Nooteboom 1993, p. 1).

The entrepreneur first appeared in the writings

of Cantillon (1680–1734). Cantillon recognized

three classes of economic agents: landowners,

entrepreneurs and employees. Cantillon’s entre-

preneur is someone who exercises business

engagements in the face of uncertainty. He argued

that the origin of entrepreneurship lies in the lack

of perfect foresight. Von Thünen also sharply

discriminates between the entrepreneur and the

supplier of financial capital, who is similar to

Cantillon’s landowner. Menger, being one of the

founders of the Austrian school, also makes this

distinction. See Hébert and Link (1989). He saw

the entrepreneur primarily as a person combining

production factors. This draws attention to the

personality of the entrepreneur. See also Lumpkin

and Dess (1996).

Marshall describes the function of “super-

intendence”. This superintendent organizes the

production in a firm. Marshall attached a more

important role to entrepreneurs, “the pioneers of

new paths” (Marshall, 1961), than any other neo-

classical theorist. The mainstream modern neo-

classical economists apparently have not cared to

include the entrepreneur in their formalized model.

Knight and Schumpeter distinguished this man-

agerial or superintendent role from the role of the

“entrepreneur”. Since the writings of Knight, it is

customary to distinguish between risk and uncer-

tainty. The latter is unique and uninsurable. We

will discuss the disappearance of the entrepreneur

from economic theory in section 2.2. We will also

see that Knight’s distinction between risk and

uncertainty parallels information problems within

firms, increasing the need for entrepreneurial coor-

dination.

Based on their study of the history of economic

thought about entrepreneurship, Hébert and Link

(1989, p. 47) propose the following “synthetic”

definition of who an entrepreneur is and what he

does: “

the entrepreneur is someone who specializes

in taking responsibility for and making judgmental

decisions that affect the location, form, and the use

of goods, resources, or institutions

”. When search-

ing for links between entrepreneurship and growth,

this definition does not fully suffice. The dynamics

of perceiving and creating new economic oppor-

tunities and the competitive dimensions of entre-

Linking Entrepreneurship and Economic Growth 31

preneurship need more attention. We will return

to the definition of entrepreneurship in section 5.

2.2.

Disappearance and revival

In the traditional interpretation of the neo-classical

model, all individual agents have perfect infor-

mation. Their economic objectives are clearly and

rationally stated. In equilibrium, consumers and

producers reach one set of prices at which demand

for each good equals its supply. All markets that

are implicitly assumed to exist and to work per-

fectly well are cleared at this set of equilibrium

prices. Given this definition of a firm’s task, there

is no need for innovative alertness and risk bearing

initiative.

The neo-classical model, with its production

function, the internal logic of rational choice and

perfect information, leaves no room for an active

entrepreneur.

As neo-classical economics became

more formalized and as the mathematics of equi-

librium theory became more important, references

to the entrepreneur receded from the micro text-

books. The model left no room for aspects like

initiative, charisma, stubbornness and the struggle

with new ideas and uncertainty. “The model is

essentially an instrument of optimality analysis of

well defined problems which need no entrepreneur

for their solution” (Van Praag, 1996, p. 17, refer-

ring to Baumol, 1968 and 1993a). Also see

Barreto, 1989 and Kirchhoff (1984, p. 30).

Reality, however, does not consist of well-

defined problems alone. The neo-classical model

constrained the decision making of the entrepre-

neur, in terms of product quality and price, tech-

nology, within limits wholly alien to the context

in which real world entrepreneurs characteristi-

cally operate (Kirzner, 1985). It is now some

twenty years since economic theorists have come

to feel uncomfortable about the absence of entre-

preneurship from their models. A number of cir-

cumstances have contributed to this discomfort.

Firstly, the importance of the entrepreneur in

the real world became more and more difficult

to ignore. Some economists had predicted that

large firms would prevail in economic life, due to

their higher efficiency and superior technology

(Galbraith, 1967). In the 1980s it became clear that

firms of different size continued to coexist in

each industry. The importance of mass-producing,

“Fordist” firms declined (Piore and Sabel, 1984).

Flexibility of (groups of) small firms was shown

to result in competitive advantages. In some cir-

cumstances, like in a very turbulent environment,

small firms can act more resolutely. Also, large

firms have created more room for entrepreneurial

employees to act within the firm. We will expand

on this “corporate entrepreneurship” in section 4.

The share of small firms expanded in the 1980s

in many industries in many industrialized coun-

tries. This generated an increased interest in the

concept of entrepreneurship. Another reason why

the interest in entrepreneurship has grown, is the

employment problem in Western Europe. Many

politicians and economists have the intuition that

new possibilities for growth, innovation and

creating jobs will come from small and new firms.

Two theoretical developments outside the realm

of established neo-classical theory brought entre-

preneurship within the focus of attention (Casson,

1991). Leibenstein in formulating his X-efficiency

theory distinguished himself from the neo-classi-

cals. Basically, X-efficiency is the degree of

inefficiency in the use of resources within the

firm: it measures the extent to which the firm fails

to realize its productive potential. Four differences

can be identified between the X-efficiency theory

and neo-classical theory. One is that contracts are

incomplete. This leads to the second main differ-

ence, which can be compared to the principal-

agent problem. According to Leibenstein, there is

a tension between the employee and the employer

over how hard the former should work. Thirdly,

effort and alertness are required to change old

routines and production techniques. Finally,

Leibenstein differs from neo-classical theory in

regarding the firm as an organization of different

individuals that have no consensus on their

objectives. Leibenstein sees entrepreneurship as a

creative response to X-efficiency (Leibenstein,

1968 and 1979).

A second addition to neo-classical theory was

offered by institutionalism. Coase (1937) saw the

entrepreneur as a coordinator of production within

the firm. This coordination is needed because the

price mechanism is mostly not used to allocate

resources within the firm itself. Outside the firm,

price movements direct production. Williamson

(1975) elaborated on this approach with his thesis

that firms concentrate on economizing on trans-

Sander Wennekers and Roy Thurik

action costs. Institutionalism also focused atten-

tion on information problems and hierarchical

tensions within an organization. An important

question is how entrepreneurial individuals can

“appropriate” the gains of their specific abilities.

Is it within a firm as an “intrapreneur” or by

starting a new firm as an entrepreneur? We will

expand on this in the section on corporate entre-

preneurship.

In sum, we see that the importance of entre-

preneurship increased by developments in the

economic process itself and was recognized by

theories serving as a supplement or an alternative

to the established neo-classical paradigm.

2.3.

Entrepreneurship: new entry and newness

Hébert and Link (1989) show that many different

roles

of the entrepreneur can be distinguished.

However, from a viewpoint of linking entrepre-

neurship to economic growth, two major roles of

entrepreneurship can be singled out. The first has

to do with “new entry” and the second with

“newness” in general. First, the entrepreneur as the

founder of a new business: “. . . someone who

creates and then, perhaps, organizes and operates

a new business firm, whether or not there is

anything innovative in those acts”. Secondly,

entrepreneurship plays a more general innovative

role in economic life: “. . . the entrepreneur as the

innovator – as the one who transforms inventions

and ideas into economically viable entities,

whether or not, in the course of doing so they

create or operate a firm” (Baumol, 1993b, p. 198).

The latter approach can be embodied in the

former, i.e. an innovation implemented by a firm

start-up (see Kirchhoff, 1994 p. 37, who regards

entrepreneurship as “innovation by newly formed

independent firms”).

The management literature has a broader view

upon entry. In surveying this literature, Lumpkin

and Dess (1996) integrate the renewing aspects

of entrepreneurship. “New entry can be accom-

plished by entering new or established markets

with new or existing goods or services. New entry

is the act of launching a new venture, either by a

start-up firm, through an existing firm or via

internal corporate venturing” (Lumpkin and Dess,

1996, p. 136). In their view, the essential act of

entrepreneurship is more than new entry as we see

it. In section 4 we will see that entrepreneurial

activities in existing, large firms often take place

by mimicking smallness. Usually, new-firm start-

ups and innovative entrepreneurship are treated

separately. In the next two sections we will pay

attention to both appearances of entrepreneurship.

2.3.1.

New entry: start-ups

To some the creation of new organizations is what

entrepreneurship is all about. This view is clearly

expressed by Gartner (1989, p. 62). A firm start-

up is a major form of (new) entry into an industry.

Both macro and micro-economic factors influence

start-ups. Since measuring the number of new-firm

start-ups has not been done systematically at the

industry level, but mostly at the macro-level

(Audretsch, 1995, p. 56), separating macro-

economic influences from microeconomic causes

of new-firm start-ups is difficult. Three major

points can be emphasized (Audretsch, 1995).

Firstly, the number of new-firm start-ups and its

importance relative to the total number of firms

differs considerably across industries. Secondly,

the number of start-ups differs significantly from

year to year. Thirdly, the impact of macro-

economic developments varies from industry to

industry.

The traditional view on why firms enter says

that firms are attracted by excess profitability in

an industry because of lack of competitors. Start-

ups play a more important role than reestablishing

market equilibrium. Antitrust regulation deter-

mines the legal structure for the role entrepre-

neurship can play in stimulating competitiveness.

We will return to this in section 3. New-firm start-

ups do not take place at the same rate in every

industry. Audretsch (1995, p. 63) finds that, due

to differences in the underlying knowledge struc-

ture, new-firm start-ups tend to be more important

in industries that can be characterized as having

an entrepreneurial technological regime. New

firms tend to be less important in industries with

a routinized technological regime. This difference

is caused by higher expected profits when starting

up in an industry with an entrepreneurial techno-

logical regime.

To start as an entrepreneur both “willingness”

and “opportunity” are essential (Van Praag, 1996,

p. 39). She defines opportunity as “the possibility

to become an entrepreneur if one wants to”.

Linking Entrepreneurship and Economic Growth 33

Opportunity depends on starting capital, entrepre-

neurial ability and the (economic) environment.

Van Praag regards willingness to start as an

entrepreneur as “dependent on both individual

preferences for the special features of entrepre-

neurship as well as on the alternative available

options and their perceived attractiveness”.

Although reliable data are scant, there are indi-

cations that since the mid-1980s start-ups have

increased in several Western countries. This rise

was particularly strong in The Netherlands.

2.3.2. Newness: innovating entrepreneurship

Schumpeter

was the economist who has most

prominently drawn attention to the “innovating

entrepreneur”. He or she carries out “new combi-

nations we call enterprise; the individuals whose

function it is to carry them out we call entrepre-

neurs” (Schumpeter, 1934, p. 74). Dess and

Lumpkin write that: “Innovativeness reflects a

firm’s tendency to engage in and support new

ideas, novelty, experimentation, and creative

processes that may result in new products,

services, or technological processes. Although

innovations can vary in their degree of radicalness,

innovativeness represents a basic willingness to

depart from existing technologies or practices and

venture beyond the current state of the art”

(Lumpkin and Dess, 1996, p. 142). Innovativeness

can be distinguished between product-market

innovation and technological innovation. The

latter which until recently enjoyed the main focus

of research into this field, “consists primarily of

product and process development, engineering,

research, and an emphasis on technical expertise

and industry knowledge. Product-market innova-

tiveness suggests an emphasis on product design,

market research and advertising and promotion”

(Lumpkin and Dess, 1996, p. 143). Using a broad

definition of new entry, Dess and Lumpkin point

out that entrepreneurship can be innovative

without new products or production processes

being introduced.

Enlarging the amount of innovative entrepre-

neurship has long been the aim of government

policy. Schumpeter does not formulate any

concepts for the role of government in stimulating

“innovative entrepreneurship”. Baumol states that

this is the main shortcoming of Schumpeter’s

theory: “. . . the paucity of insights on policy that

emerge from it”. Baumol finds that institutional

arrangements or other social phenomena affect the

quantity of entrepreneurial effort. These structural

and cultural factors can also determine the allo-

cation of entrepreneurship. Essential for economic

development is “. . . that the exercise of entre-

preneurship can sometimes be unproductive or

even destructive, and that whether it takes one of

these directions or one that is more benign

depends heavily on the structure of payoffs in the

economy – the rules of the game” (Baumol, 1990,

p. 899). Some examples can clarify this: Baumol

describes various types of rent seeking, like the

wars in the early Middle Ages in Western Europe

over land and castles. “Such violent economic

activity inspired frequent and profound innovation

. . . its net effect may be a . . . net reduction in

social income and wealth” (Baumol, 1990, p. 904).

A more recent example is that in Japan, when

compared to the United States, “. . . the rules of

the game have been designed to discourage the

allocation of entrepreneurial talent into rent-

seeking litigation” (Baumol, 1993a, p. 240). In

section 3 we will return to the role of entrepre-

neurship in the economic history of various

countries.

2.4.

Conclusions from the literature on

2.4. entrepreneurship

The different historical views of economists offer

a broad perspective on the concept of entrepre-

neurship as well as on the intermediate variables

that form the connection between entrepreneurship

and economic growth. The neo-classicals stress

the role of the entrepreneur in leading markets to

equilibrium. In the Austrian tradition, the alertness

for profit opportunities and the importance of

competition are emphasized. Schumpeter sees the

entrepreneur as the innovator in economic life.

Table I provides our conclusions in terms of the

preliminary framework proposed in section 1.

Entrepreneurship has to do with individuals,

both with their traits and their actions (roles).

Newness through start-ups and innovations as well

as competition are the most relevant factors

linking entrepreneurship to economic growth.

Many questions remain, like what is the

influence of basic conditions on entrepreneurship

and on the intermediate linkages? Which is the

Sander Wennekers and Roy Thurik

role of smallness and what are the opportunities

for entrepreneurship within large organizations?

Which intermediate linkages are still missing from

the analysis? These questions will be touched

upon in the following sections.

3. Economic growth and entrepreneurship

Where entrepreneurship was the focus in the pre-

ceding section, we will now focus upon economic

growth. In section 3.1 we briefly deal with growth

theories. Some aspects of the history of economic

growth are surveyed in section 3.2. Finally, in

section 3.3, some modern views as formulated in

industrial economics and in evolutionary eco-

nomics are discussed.

3.1.

Growth theory

In this section, the distinction will be made

between the “old” neo-classical growth theory and

the “new”, endogenous growth theory. For a long

period neo-classical growth theory concentrated

solely on the contribution of labor and capital to

the process of economic expansion. In its different

forms, either as growth accounting (Denison,

1985) or as a theory of long-run tendencies

(Solow, 1970), there remained much to explain.

Both forms generate a substantial residual, which

was ascribed to the effects of technological

change. This change is unaccounted for and is

viewed as exogenous “manna from heaven” (Van

de Klundert and Smulders, 1992, p. 177).

The basic idea of the new growth theory is to

endogenize the long-run rate of economic expan-

sion. Baumol (1993a, pp. 259–260) suggests

“. . . that so far as capital investment, education,

and the like are concerned, one can best proceed

by treating them as

endogenous variables in a

sequential process – in other words, these vari-

ables affect productivity growth, but productivity

growth, in turn, itself influences the value of these

variables, after some lag. These endogenous influ-

ences are, then, critical components of a feedback

process”. Baumol (p. 260) continues: “To some

degree, the same story can be told about the

exercise of entrepreneurship, investment in inno-

vation, and the magnitude of activity directed to

the transfer of technology. These too, clearly, are

influenced by past productivity growth achieve-

ments and they also, in their turn, influence future

growth. Yet it would seem plausible that there is

a strong streak of exogeneity in these variables,

which can help to account for the outbreak and

spread of industrial revolutions and for the relative

decline and even for the collapse of economies

that formerly were models of success”. These

statements describe both the contribution of

endogenous growth theory and the dilemma this

theory is confronted with.

Few attempts have been made to incorporate

entrepreneurship in growth models. Entrepreneur-

ship did not fit in the traditional, theoretical

neo-classical models for two reasons. Firstly, the

neo-classical axiom of perfect competition implies

that there are no profit opportunities for entrepre-

neurs left. Secondly, models of general equilib-

rium do not take into account the dynamics of

Linking Entrepreneurship and Economic Growth 35

TABLE I

Conclusions based upon the historical views of economists

Items from the framework Relevant variables found in the literature Relevant disciplines Focal unit of observation

Conditions – (only indirect links were found in the

literature; to be discussed in section 3)

Entrepreneurship – traits (alertness, perception) – psychology – individuals

– roles of the entrepreneur – economics – individuals

Intermediate linkages – newness through start-ups and – industrial economics – firms

innovation

– markets and competition – industrial economics – firms and industries

– equilibrium versus disequilibrium – economics – aggregate levels

Economic growth – (only indirect links were found in the

literature; to be discussed in section 3)

“innovating entrepreneurship”, as described in

section 2. The axioms of the endogenous growth

theory have created new possibilities for fitting

entrepreneurship and/or innovation into growth

models. A first example is Romer’s version (1990)

in which the engine of growth is the research

sector which produces blueprints for new varieties

of capital goods that are in turn produced and used

in the goods-producing sector. The model assumes

increasing returns to scale. By assuming monop-

olistic competition (Chamberlin, 1933), rents can

be assigned to the research activities that generate

knowledge. Secondly, the model pertains to some

features of Schumpeter’s later work:

growth is

driven by monopoly rents obtained by the intro-

duction of new products, economic change is the

result of purposeful activities of profit-seeking

entrepreneurs.

Van de Klundert and Smulders (1992, p. 191)

state that Schumpeter’s “creative destruction”

gives a much richer description of entrepreneur-

ship and economic dynamics. A recent attempt to

capture “creative destruction” in a formal model

can be found in Aghion and Howitt (1992). The

R&D sector invents new production techniques

making existing techniques obsolete. Producers

shift to this new technique and the innovator is

rewarded until a new technique is found which

replaces his invention. The intermediate variable

of innovativeness, enlarging the long-term growth,

can be seen as valuable in the endogenous growth

theory.

A connection between historical views on

entrepreneurship (Schultz, 1980) and the endoge-

nous growth theory (Lucas, 1988) can be made

using the concept of “enlarging entrepreneurial

ability”, as a form of human capital. Schultz stated

that the quantity and quality of entrepreneurial

efforts can be enhanced by investment in entre-

preneurial ability: “. . . the abilities of entrepre-

neurs to deal with the disequilibria that are

pervasive in a dynamic economy are a part of the

stock of human capital. . . . Many of the disequi-

libria that are associated with economic growth are

endogenous. An innovation by a business enter-

prise (Schumpeter’s innovator) is an endogenous

event” (Schultz, 1980, p. 437 and p. 444). Schultz

is a scholar of the Anglo-American tradition, since

he concentrates on the abilities of entrepreneur-

ship to restore equilibrium. Eliasson (1995)

contests this view. He stresses the importance of

entry and exit and selection mechanisms. Lucas

(1988) concludes from his models that structurally

divergent rates of growth can occur, due to the

external effects of human capital (spillovers). In

our view the external effects of entrepreneurship,

a special form of human capital, can be seen as

an additional intermediate variable derived from

the “new” growth theory.

The new growth theory puts emphasis on the

endogenous role of innovation and human capital

formation in explaining economic growth. On the

other hand, in spite of the strong technological

dynamism of today it is well to remember that in

world history technological creativity has been

an exception rather than a rule (Mokyr, 1990).

Underlying political, social and economic condi-

tions have time and again been seen to play a vital

role.

Summing up, the endogenous growth theory

focuses explicit attention on the intermediate

variables (human) capital formation and innova-

tion. However, entrepreneurship remains largely

implicit and this theory does not shed light on the

underlying conditions of the entrepreneurial

activity needed for (human) capital formation and

innovation. This will be the subject of the next

section.

3.2.

Economic history and the causes of long

3.2. term growth

Growth accounting in a neo-classical framework

can disentangle economic growth into contributing

factors such as labor inputs (correcting for hours

of work and education), capital formation,

economies of scale and advances in the state of

knowledge. But it leaves a residual, and more

importantly it misses the fundamental causes gov-

erning capital formation and innovation. Lewis

(1955) already distinguishes between the proxi-

mate causes of economic growth (the effort to

economize, increase of knowledge and increase of

the amount of capital per head) and the underlying

“causes of these causes”, which are to be found

in beliefs and institutions. North and Thomas

(1973) put it even more bluntly: “The factors we

have listed (innovation, economies of scale, edu-

cation, capital accumulation, etc.) are not causes

of growth; they

are growth”. According to them

Sander Wennekers and Roy Thurik

the causes of economic growth are to be found in

the factors which determine the efficiency of the

economic organization: incentives, property rights

etc.

An interesting approach focusing on these

factors is chosen by economists studying histor-

ical processes of economic growth. An introduc-

tion to this approach which aims at “. . .

comprehending the economy as a dynamic, his-

torical process’ is provided by Lazonick (1991, pp.

115–117 and pp. 303–321). The time span covered

in these historical investigations is usually quite

long (a century or more). This time span encom-

passes large differences in average growth rates

between periods (usually referred to in terms of

the “rise and decline of nations”). It keeps track

of slowly changing factors in the culture, the legal

framework and the external organization of

markets, and it covers the full length of time it

may take for new technologies to disseminate

through the economic system.

Paraphrasing Cipolla (1981) who regards

growth accounting as highly artificial, because in

reality “everything flows together” can summarize

their approach. Referring to Schumpeter he states

that economic growth cannot be understood

without taking the role of entrepreneurship into

account. Cipolla (p. 120) however continues:

“Entrepreneurial activity is a necessary ingredient,

but not a sufficient one. It is the human vitality

of a whole society which, given the opportunity,

comes into play and sets loose the ‘creative

responses of history’”.

This field of “the rise and fall of nations” is

extremely wide and diverse.

Below we will

certainly do no full justice to the analysis of each

of the authors whom we cite. However, all is well

if we will have succeeded in painting a picture of

the role of entrepreneurship in the historical

analysis of economic growth. We follow two

approaches: historical case studies and general-

izations (Lewis, 1955). First some major periods

in European history will be summarized one by

one, while another short case study will discuss

the so-called East Asian miracle. Secondly, some

general views on the role of culture and institu-

tions will be discussed and the main findings will

be integrated in our final framework.

3.2.1.

Role of entrepreneurship in European

3.2.1. history

Between 1000 and 1500 the European economy

seemed locked in the feudal system. Property

rights were not secure, the rendering of many

services in the so-called manorial system (Cipolla,

1981, p. 114) was not monetarized, local tolls

hindered a free flow of goods. These conditions

improved slowly. Gradually, a system evolved in

which entrepreneurship was primarily embodied

by a class of merchants advancing raw materials

to the craftsmen and marketing the finished goods.

Also, the rise of the cities created a frontier for

experimentation and innovation.

The Italian city states took the lead in this

development, and their commercial success went

hand in hand with a Renaissance of arts and

sciences. Gradually the center of gravity moved to

the Low Countries. In the seventeenth century

conditions in the Northern Netherlands were

highly conducive for an upsurge of entrepreneur-

ship. The legal framework was advanced, property

rights were secure and the economy had been

monetarized to a great extent. Markets for final

goods and production factors were reasonably

accessible. Social mobility was relatively high.

The rate of urbanization was far ahead of the rest

of Europe, and in these cities demand conditions

were favorable for economic expansion.

According to De Vries and Van der Woude (1985)

the resulting Golden Age can be regarded as the

first round of modern economic growth.

As is well known, in this period also the arts

and sciences bloomed. Again we quote Cipolla

(1981, p. 120): “In the seventeenth century, when

the Low Countries became the prime movers in

international trade while producing great entre-

preneurs such as De Geer or the Tripps, they also

produced jurists like Grotius, experimentalists

such as Huyghens and Leeuwenhoek, and painters

such as Rembrandt.” Regarding periods of

economic rise in general he continues: “In order

to understand what happened in certain societies,

it is necessary to understand an atmosphere of

collective enthusiasm, of exaltation and of coop-

eration”.

Jane Jacobs (1984) has a great deal to offer

when dealing with entrepreneurship. While it is

fair to say that “cities” and not “entrepreneurship”

form the central theme of her writing, it is clear

Linking Entrepreneurship and Economic Growth 37

from her analysis that the all-important growth of

import-replacing cities must be viewed as a highly

entrepreneurial process. Historically, she finds two

major patterns or motifs: reliance of backward

cities upon one another and economic improvisa-

tion. Her views on the rise of Venice and subse-

quently many other hitherto backward European

cities may serve to bear this out. Essentially the

Veneti used their initial trade with the rich city of

Constantinople as a springboard to start re-

exporting and selling their imitations to other

backward cities in Europe. They were able to

replace more imports by home production and to

shift to more sophisticated imports as their wealth

increased. Meanwhile, other cities used Venice as

a springboard. Finally, a volatile network of

inter-city trade developed, constantly changing in

content and stimulating new markets for city-made

innovations. According to Jacobs there were no

“ready-made schemes of producing predetermined

choices of products” underlying these develop-

ments. On the contrary, the entrepreneurs in the

backward cities of Europe had to experiment and

to improvise in order to develop and sell cheaper

substitutes for more sophisticated import-goods.

According to Cipolla (1981, p. 276), at the end

of the fifteenth century England was still an

“underdeveloped country” in comparison to coun-

tries such as Italy, the Low Countries, France and

Southern Germany. Between 1500 and 1700

considerable changes occurred. At first British

exports were dominated by wool and woolen cloth

only. After 1550, gradually the many immigrants

from France and the southern Low Countries

brought many other “industrious manufactures”

with them. English society at the time showed a

striking cultural receptiveness and open-minded-

ness for new ideas and techniques. Increasingly

young men were sent abroad to study at foreign

universities. English society showed an ability to

give positive and innovative responses to chal-

lenges and difficulties such as increasing compe-

tition and scarcity of raw materials. Entrepreneurs

adopted other methods of production, diversified

into other manufactures and penetrated new

markets. Gradually the English developed a world-

wide commercial network. The notable develop-

ment of international trade, according to Cipolla

(p. 295) “proved to be a great school of entrepre-

neurship”.

By 1700 the legal and institutional conditions

had also considerably changed and were favorable

for factor mobility and innovation in economic

activity (North and Thomas, 1973). The elimina-

tion of feudalism, the declining power of the

guilds, the burgeoning of the joint stock company

and the development of a banking system are some

important examples they cite. North and Thomas

(p. 156) conclude: “England . . . had developed an

efficient set of property rights embedded in

common law . . . and had begun to protect private

property in knowledge with its patent law. The

stage was now set for the industrial revolution”.

The Industrial Revolution was both a revolution

in production techniques (mechanization) and in

organization (the factory system). A great variety

of innovations, mutually reinforcing each other,

yielded an unprecedented increase in productivity

(Landes, 1969, p. 41). There is apparently no full

consensus why this revolution came about first in

Britain, but some factors seem beyond doubt.

Among these is the technological leadership

(Mokyr, 1990, p. 239) which Britain showed

between 1750 and 1850.

In explaining this leadership British superiority

in implementation (innovation) was more decisive

than their strength in inventions. It was not based

on scientific leadership although British inventors

and manufacturers were in constant contact with

scientists. Another factor was its endowment of

technically skilled labor, which had more to do

with on-the-job training than with schooling.

Mokyr (p. 254) sums it all up in one sentence: “It

is arguable that though Britain may have had an

absolute advantage in both inventors and entre-

preneurs, it had a comparative advantage in

entrepreneurs and skilled workers, and thus

imported inventions and inventors and exported

entrepreneurs and technicians to the industrializing

enclaves of the Continent”.

In Britain a free flow of entrepreneurship

between lines of business was also manifest, and

the allocation of resources was more responsive to

new opportunities than in Continental economies

which were characterized by occupational exclu-

siveness (Landes, 1969, p. 71). Also in these

countries social and psychological attitudes,

viewing the family business as a way of life and

not as a means to an end, were unfavorable to

effective entrepreneurship and competition

Sander Wennekers and Roy Thurik

(Landes, pp. 131–132). The inevitable conclusion

is that during the Industrial Revolution Britain

excelled in entrepreneurship.

During the 19th century decline set in. Some

figures from Maddison (1995, pp. 23–24) may

serve to illustrate this. During the period 1870

through 1973 real growth of GDP per capita in

Britain was only 1.3% annually and lagged behind

that in the U.S.A. (1.9%) and Germany (1.9%),

and certainly behind that in Japan (2.7%).

Consequently, in 1973 per capita income in

Britain, once the richest nation in the world, had

fallen substantially behind that in countries such

as Switzerland, Denmark, Germany and the U.S.A.

It is beyond the scope of this paper to consider

all the possible causes of this decline. We will only

view this retardation through the perspective of

entrepreneurship and some underlying factors.

Wiener (1981) paints a vivid picture of how the

Industrial Revolution seems to have caused a

strong cultural reorientation. Part of this was a

romantic reaction to industrial society (“our

England is a garden”). Another part has to do with

what Wiener calls “the gentrification of the

entrepreneurial class”, in which values such as

zeal for work, invention and money making gave

way to a preference for comfort, enjoyment and

public service. This was reinforced by the school

system which, modeling itself on the public

schools, separated the middle class from tech-

nology and business. Quite contrary to the U.S.A.

where Henry Ford was a folk hero, in Britain a

successful entrepreneur like William Morris “has

received largely uninformed and unenthusiastic

acceptance” (Wiener, 1981, p. 131). Wiener also

gives two examples illustrating how this cultural

reorientation permeated deeply into the 1960s and

the 1970s. First, several surveys among students

and graduates then showed a “combination of

ignorance and distaste” towards industry.

Secondly, a poll revealed that a large majority of

directors of leading British companies felt that

television and universities were “biased against

business and private enterprise”. At the same time

the legal and institutional framework – with high

marginal tax rates, public monopolies, shop

stewards, and collusive tendering among its

prominent features – had become less conducive

to entrepreneurship and competition.

Another authoritative source in this area is

Landes who also argues that the major reasons

why Britain declined when compared to Germany

were “. . . not material, but rather social and

institutional” (Landes, 1969, p. 334). As examples

he mentions the control of well-organized craft

workers and the limited organizational capabilities

of the entrepreneurs as major obstacles to inno-

vation.

Porter (1990, p. 502) sums it all up for the post-

war period: “British firms have, too often, a man-

agement culture that works against innovation and

change . . . Combined with such managerial atti-

tudes has been a debilitating relationship between

labor and management. . . . Unions have had great

power to negotiate restrictive practices, which

have inhibited innovation and retarded produc-

tivity.” According to Porter also the motivation

of managers and workers to work hard and to earn

a great deal of money was traditionally low in

Britain, and absenteeism into the early 1980s was

high. High personal tax rates contributed to dulled

incentives. Finally domestic rivalry according to

Porter has long been lacking. Instead of competing

fiercely British firms would rather attempt to

protect a monopoly or to merge with another firm.

Up to the early 1980s rivalry was also limited by

a slow rate of new business formation.

Summarizing one can say that entrepreneurship

has played a vital role both in the take off stages

of the European economy and during the Industrial

Revolution. Moreover, it is likely that economic

decline, such as experienced in late 19th and most

of 20th century Britain, was aggravated by the

cultural and institutional framework becoming less

conducive to entrepreneurship.

3.2.2. The East Asian miracle

One of the most interesting recent growth experi-

ences is the superior achievement of the East

Asian economies in the last decades. In a World

Bank policy research report, titled “The East Asian

Miracle; economic growth and public policy”, the

rapid and sustained growth of the Republic of

Korea, Taiwan, Singapore, Hong Kong, Japan,

Indonesia, Malaysia and Thailand in the period

1965–1990 is analyzed. See World Bank (1993).

These eight so-called High-performing Asian

economies (HPAEs) experienced an average

annual growth rate of real GNP per capita of 5.5%,

more than twice that of the OECD countries. At

Linking Entrepreneurship and Economic Growth 39

the same time the HPAEs diminished the

inequality of their income distributions.

In fact, the analysis of the World Bank fits well

into our framework. The remarkable growth

achievements manifest themselves in both exports

and domestic demand, and can directly be linked

to superior accumulation of physical and human

capital, allocation of resources to productive

investment, and the acquisition and mastering of

technology. These investment activities were

supported by public policies promoting macro-

economic stability, diminishing inequality and

universal primary and secondary education, as

well as by a reliable legal framework conducive

to competition and international trade. In spite of

this attention for fundamentals it is fair to say that

the analysis is primarily macroeconomic and

somehow does not convey that innovation, private

investment and marketing all are manifestations of

entrepreneurial activity. Apart from a factual

section on the profusion of small and medium-size

enterprises there is no analysis of the rise of entre-

preneurship. Nor is there an extensive analysis of

the role of cultural factors such as attitudes

towards risk and uncertainty, and openness to

foreign technology.

Support for an alternative view on the East

Asian miracle can be found with Phelps in his

comments on a paper by Mankiw (1995, pp.

312–313) concerning “The Growth of Nations”.

We quote Phelps: “The alternative view also has

implications for the demand for human capital.

Why is it that several countries have, in only a few

short decades, experienced a rapid accumulation

of human capital – the Asian miracle economies

– while other countries at about the same place in

the poverty ranking have not? Surely the answer

is the emergence of entrepreneurship, encouraged

and sanctioned by the government”. Porter (1990)

endorses this alternative view in his section on

Emerging Korea. Two of the key factors he

mentions are the willingness to take risk and the

intensity of competition. Primary focus of the

central government has been to promote interna-

tional competitiveness. Finally, Hofstede (1995,

pp. 208–209) points at the comparatively strong

long-term orientation prevalent in these countries,

which may have determined their remarkable

growth performance.

3.2.3.

Culture and the legal framework

Values are often seen as the hard core of a culture.

The outer layers of a culture are then made up by

rituals, heroes and symbols. See Hofstede

(1995,

pp. 18–20). Other authors, such as Lynn (1991),

speak of attitudes rather than of values. The atti-

tudes and values toward work, production, wealth

and saving, toward new information, invention and

strangers, and finally toward risk and failure seem

particularly relevant for economic growth.

Probably, these values are active through all

players be they consumers, workers, business men

or government officials. As we have seen from the

historical case studies, they may also influence

growth through the degree and quality of entre-

preneurship in a society.

Jane Jacobs has made some additional obser-

vations about culture and economic growth. In her

view: “In its very nature, successful economic

development has to be open-ended rather than

goal-oriented, and has to make itself up expedi-

ently and empirically as it goes along” (Jacobs,

1984, p. 221). Entrepreneurs have to find impro-

vised solutions for unforeseeable problems. And

this has little to do with “long-range planning” and

meeting “targets”. Jacobs also cites Cyril Stanley

Smith from MIT, who points out that the roots of

invention are to be found in curiosity, and espe-

cially “esthetic curiosity”. Smith also gives

examples how many industrial products and tech-

nologies first started out with frivolities and

luxuries.

A classic study of the relationship between

culture and economic development is Max

Weber’s famous essay (1958)

on “The Protestant

ethic and the spirit of capitalism”. Weber studies

how psychological conditions may have facilitated

the development of capitalism. In his view the

ascetic Calvinist ethic with its emphasis on piety,

industry and zeal, was greatly conducive to the

spirit of modern capitalism that emphasizes

rationality and discipline. Already contemporary

authors (Sir William Petty as quoted by Weber, p.

179) attributed the economic success of seven-

teenth century Holland to that the numerous

protestants in that country “are for the most part

thinking, sober men, and such as believe that

Labour and Industry is their duty towards God”.

In retrospect however, De Vries and Van der

Woude (1995, pp. 198–213) contend that much of

Sander Wennekers and Roy Thurik

the capitalist spirit was already present in (late)

medieval Holland and was mainly reinforced by

Calvinism.

Several authors have also considered the rela-

tionship between culture and economic growth

during the 20th century. Hofstede (1995, pp.

208–217) points out that a long term orientation

as expressed by thrift, investment and persever-

ance may be particularly conducive to economic

growth. Some support for this hypothesis was

found in a sample of 23 countries for the years

1965–1987. Hofstede (1995, p. 211) also regards

this long-term orientation as conducive to entre-

preneurship. Lynn (1991) has conducted an

empirical study linking economic growth to

several work attitudes in 41 nations. Lynn reports

a significant positive correlation between “com-

petitiveness” in each country (measured as a

positive attitude towards competition) and the

growth performance of these countries over the

years 1970 through 1985.

Recently, however, Wildeman et al. (1998)

reported that relationships could also be counter-

intuitive, where they found a positive relationship

between uncertainty avoidance (at the national

level) in 23 developed countries and the rate of

self-employment in these countries. They explain

this result as further proof that dissatisfaction may

be a source of entrepreneurship.

In summarizing the literature we conclude that

the impact of cultural dimensions on entrepre-

neurship and economic growth, while probably

significant, is not straightforward. The role of the

following traits deserves further investigation

while distinguishing between the individual level,

the firm level and the country level:

– open-mindedness towards other cultures;

– curiosity, creativity and experimentation;

– perseverance;

– valuation of wealth and savings;

– acceptance of risk and failure;

– competitiveness.

From the historical case studies we have already

seen the relevance of the legal framework and

economic institutions for economic growth. Lewis

(1955) offers a general framework to study the

role of institutions. He distinguishes:

– the right to reward; this has to do with property

rights and the structure of incentives;

– possibilities for trade and specialization; in

history as well as today the extent of the market

is determined by the presence or absence of

prohibitions such as tolls, guilds, tariffs, quota

and other barriers to the mobility of goods and

productive factors;

– economic freedom, i.e. the freedom a society

permits for seeking out and seizing economic

opportunities; first of all this has to do with the

possibilities to make a profit and to go

bankrupt; also relevant is the legal framework

determining the access to resources through the

functioning of the labor market and the capital

market; finally economic freedom has to do

with the possibilities (both legal and cultural)

for vertical mobility.

The seminal contribution by Olson (1982) adds a

vital element to this perspective. His central thesis

is that special interest groups slow down a

society’s capacity to adopt new technologies and

to reallocate resources in response to changing

conditions, and thereby reduce the rate of

economic growth. Further evidence is found in

Mokyr (1990). Some major examples of these

coalitions are labor unions blocking labor saving

innovations, professional groups regulating entry

to their profession and price cartels. Olson

contends that the harm for society is often much

greater than is the gain for the interest group. As

he demonstrates through an extensive historical

tour d’horizon, stable societies accumulate more

collusion over time, and see their growth rates

falter. Whereas societies in which these narrow

interest groups have been destroyed (by war or

revolution) enjoy a period of great gains in

economic growth. Far from advocating “war and

revolution”, Olson does recommend to repeal

special interest legislation and regulation, and to

apply anti-trust law to cartels and forms of collu-

sion that fix wages or prices above competitive

levels.

We conclude that the legal and institutional

framework is another vital factor hidden behind

entrepreneurship and indispensable for a good

understanding of economic growth. Viewed from

the angle of entrepreneurship and economic

growth the most vital concepts seem to be the

incentives and the competition rules. Legal incen-

tives for entrepreneurship are mainly rooted in the

Linking Entrepreneurship and Economic Growth 41

fiscal regime (replacement ratio, flat or steep tax

rates) and in the laws concerning bankruptcies.

Competition rules have to do with entry (de)reg-

ulation, anti-trust policy, removal of trade barriers

and market intransparancies, and finally with

union power in the labor market.

3.2.4.

Conclusions from economic history

Economic history offers many insights with which

to fill in and expand the framework as proposed

in section 1. Our conclusions are summarized in

Table II. A major addition to our conclusions in

section 2.4 has to do with cultural and institutional

conditions stimulating entrepreneurial traits and

behavior within a population, as well as influ-

encing the intermediate linkages (such as interac-

tion between invention and innovation). A second

addition is the evidence that, far from denying the

vital role of capital formation and technological

change for economic growth, for a real under-

standing of long-term growth it is necessary to

explicitly take into account the role of entrepre-

neurial activity underlying these intermediary

processes.

Remaining questions have to do with the role

of smallness and selection and the possibilities for

entrepreneurship within large organizations. They

will be dealt with below. First we discuss the

relevance of the historical view for modern

economies.

3.3.

Relevance of historical views at the

3.3. threshold of the new millennium

Why are the historical views on the role of culture,

the legal framework and entrepreneurial activity

still relevant for understanding economic growth

at the threshold of the new millennium? In this

section we will first consider some views on

economic growth as formulated in Porter’s “The

competitive advantage of nations” (1990). Next,

we will discuss the views on economic growth as

developed by evolutionary economics.

3.3.1.

Entrepreneurship and the competitive

3.0.3. advantage of nations

The conclusions from economic history, as

exposed in Table II, can be related to the more

recent analysis of Porter (1990). In his analysis

four interrelated sets of factors or conditions deter-

mine the competitive strength of nations and

thereby the possibilities for sustained productivity

growth. These four sets of factors make up the

so-called national “diamond”. The four determi-

nants are

• factor conditions. Porter distinguishes basic

factors (e.g. natural resources and cheap,

unskilled labor) from advanced factors (highly

skilled personnel, modern networks infrastruc-

ture);

• demand conditions. These have three main

elements: the nature of buyer needs (e.g.

sophisticated instead of basic), the size and the

pattern of growth and the existence of mecha-

Sander Wennekers and Roy Thurik

TABLE II

Conclusions from economic history

Framework Variables Relevant disciplines Focal unit of observation

Conditions – culture (open-mindedness, – social psychology, anthropology – groups and societies

acceptance of risk, long and sociology

term orientation etc.)

– institutions (incentives, – law and economics – macro framework

competition rules) influencing micro behavior

Entrepreneurship – traits and behavior – psychology and managerial – individual persons

economics

Intermediate linkages – conquest of new markets – industrial economics – firms and industries

– invention and innovation

– new business formation

– competition

Economic growth – rise and decline of nations – economics – national economies

nisms by which a nation’s domestic preferences

are transmitted to foreign markets;

• related and supporting industries. The presence

of internationally competitive supplier and

related industries stimulates rivalry and partial

cooperation;

• the structure and culture of domestic rivalry.

This encompasses a wide scope such as oppor-

tunities provided to possible new entrants, the

nature of competition between incumbent firms,

dominant business strategies and management

practices.

The relevance of Porter’s diamond for our analysis

can be summed up in one sentence: “Invention

and entrepreneurship are at the heart of national

advantage” (Porter, 1990, p. 125). More specifi-

cally, Porter’s “diamond” can help investigating

the interface between entrepreneurship and

economic growth. Demand conditions signal needs

better in some nations than in others. National

factor creation mechanisms affect the pool of

knowledge and talent. Supplier industries provide

crucial help or are the source of new entrants.

Domestic rivalry creates a good “incubation

environment” for entrepreneurs, but it can also be

a mechanism by which entrepreneurship con-

tributes to growth. Finally, feedback mechanisms

are relevant because entrepreneurship can enhance

the quality of the factor conditions through the

learning process which starting a business

provides.

In terms of our framework Porter’s diamond

offers several extensions. First, invention or rather

innovation is best viewed as a direct manifestation

of entrepreneurship, more than an intermediate

process linking entrepreneurship to growth.

Secondly, international competitiveness is a

crucial intermediate linkage between entrepre-

neurship (innovation) and economic growth;

however domestic rivalry is an essential precon-

dition for international competitiveness; so com-

petition comes in as an intermediate linkage at two

levels. Thirdly, whereas in the short run there is a

straight direct line of causation as in our pre-

liminary framework in section 1, in the long run

feedbacks are active. Finally, it is also clear from

his analysis that entrepreneurship is not restricted

to small firms.

3.3.2.

Evolutionary economics

The economy is entering a world governed by a

new technological paradigm. Like the steam

machine during the first Industrial Revolution,

Information and Communication Technology is a

pervasive new technology (or in terms of Mokyr:

a macro-invention) which will radically alter the

economy. A wave of micro-inventions and inno-

vations based on ICT is gaining momentum and

will sweep the world in the decades to come. The

implications of this radical transition for the

growth of nations will not only depend on macro-

economic conditions, but primarily on cultural and

organizational factors and on the adaptability of

institutions and the legal framework. An analysis

of the diffusion of the many applications of this

new technology will also have to include micro-

economic processes of new start-ups and of entry

by firms from outside the industry.

This ICT revolution makes it increasingly nec-

essary to distinguish between information and

knowledge. On the one hand information will

become more cheaply and readily available. In

some cases this will weaken existing entrepre-

neurial edges. On the other hand information has

to be selected, upgraded and combined with other

information in order to become useful for

economic application. Only then may it be called

“knowledge”. Whereas the raw material informa-

tion will become abundant, knowledge will remain

scarce. Undoubtedly, new entrepreneurial edges

will be based on knowledge. In this way an

economy may develop which is driven by ideas

and in which entrepreneurship equates to compe-

tition between ideas.

A framework helpful when analyzing this

transition at the level of sectors of industry is evo-

lutionary economics

as developed by Nelson and

Winter (1982), and the related theory of the

experimentally organized economy developed by

Eliasson (1995). These lines of thinking will be

briefly discussed in the following section.

The

seminal book by Nelson and Winter (1982),

bearing the title of this section, argues that in order

to understand how technical change functions as

the key driving force of long-run economic devel-

opment, it is necessary to incorporate the realities

of firm decision making as well as the dynamics

of the competitive process. In developing their

theory they acknowledge their intellectual debts

Linking Entrepreneurship and Economic Growth 43

with Schumpeter (economic development) and

Simon (human and organizational behavior).

Nelson and Winter contend that the concepts of

optimization and equilibrium which are the core

of orthodox theory are unfruitful abstractions and

simplifications from reality. Instead of maximizing

behavior of firms they use the concept of decision

rules, and instead of equilibrium they see tenden-

cies. Next, in their evolutionary theory, they

borrow some major ideas from biology such as

from Darwin and Lamarck. Individual firms have

a kind of genetic endowment in terms of technical

routines, procedures etc. These routines usually

can evolve only gradually. However searching for

new routines (innovation) is itself also a routine.

Besides, exogenous shocks can press incumbent

firms or outsiders to search for new organizational

and technical routines. In the end the competitive

process at the sector level selects the most suc-

cessful routines and weeds out the routines which

are no longer suitable. So innovation (“muta-

tions”) and selection are the catchwords in this

approach.

Although the approach chosen by Nelson and

Winter is strongly based on the premise of variety

of behavior and performance of individual firms,

there is not much explicit attention for the role

of the entrepreneur. More explicit scope for the

entrepreneur is to be found in the work of Eliasson.

He argues that market competition and economic

growth cannot be understood without recourse to

non-linear selection mechanisms and the discon-

tinuities of technical change (Eliasson, 1995). In

his view the major production factor is compe-

tence capital embodied in people. This capital

accumulates through education and learning on the

job. It is allocated and reallocated through the

labor market and the market for mergers and

acquisitions, through entry of new enterprises –

often by entrepreneurial people leaving large firms

– and through the exit of failing enterprises. These

processes make up the mechanism of “competitive

selection among business experiments”. Eliasson

has incorporated these ideas into his micro-to-

macro model of the Swedish economy called

MOSES. In his model the long-term growth rate

is determined by the institutions regulating the

mechanisms of selection and the allocation of

competence. Eliasson also argues that 30 years of

post war mistreatment of the market mechanism

show up in a decline of the percentage share of

new firms and are responsible for the slow growth

of the Swedish economy since the 1970s.

Viewed from the perspective of “linking entre-

preneurship and growth” we may now distinguish

between two lines of thinking. The first is the

neo-classical paradigm. The second we will call

the entrepreneurial paradigm. See Figure 2.

The neo-classical paradigm seems most

applicable in the more mature sectors of the

economy, the entrepreneurial paradigm seems

most relevant for understanding the rise of new,

technology-driven industries. Audretsch and

Thurik (1997) would call these sectors the

“managed” and the “entrepreneurial” sectors,

respectively. Our expanded framework as devel-

oped in Table II remains valid. An essential

addition is the crucial role of diversity (variety)

and of selection as an intermediate linkage

between entrepreneurship and economic growth.

4. Entrepreneurship in large firms

Entrepreneurial activity not only takes place in

small firms. It also happens in large organiza-

tions.

Entrepreneurship not only occurs in the

form of new small firms but also in the form of

corporate entrepreneurship, new ideas and respon-

sibilities implemented in existing large organiza-

tions. According to Drucker (1985, p. 144) today’s

large businesses will not even survive “unless they

acquire entrepreneurial competence”.

Stopford and Baden-Fuller (1994, p. 521) sum-

Sander Wennekers and Roy Thurik

Figure 2. Two paradigms.

marize how the strategy literature identifies three

types of corporate entrepreneurship. The first type

is the creation of new businesses or business units

within an existing organization – corporate ven-

turing or intrapreneurship as it is sometimes

called. Another is the more pervasive activity

associated with the transformation or strategic

renewal of existing organizations. The third type

is where the enterprise changes the “rules of com-

petition” for its industry, for example by carrying

out an innovation that fundamentally alters the

industry. Stopford and Baden-Fuller (1994, p. 523)

distinguish five attributes that are common to all

types of (corporate) entrepreneurship: proactive-

ness, aspirations beyond current ability, team-

orientation, capability to resolve dilemmas and

learning capacity. Despite the classification of

Stopford and Baden-Fuller we will use the terms

corporate entrepreneurship and intrapreneurship

interchangeably.

Stevenson and Jarillo (1990, pp. 23–25) also

regard corporate entrepreneurship as wider than

corporate venturing and include the “ability of

corporations to act entrepreneurially”. In their

view “. . . pursuing opportunity, whether through

specific company structures or not, constitutes the

core of entrepreneurship, both individual and

corporate”. In order to create corporate entrepre-

neurship top management is heavily dependent on

other individuals within the firm. As relevant

elements promoting corporate entrepreneurship

Stevenson and Jarillo mention “a conscious effort

to lessen negative consequences of failure when

opportunity is pursued” and facilitating “the

emergence of informal internal and external

networks”. This points again to the importance of

(business) culture. Furthermore they state “The

crux of corporate entrepreneurship is, then, that

opportunity for the firm has to be pursued by

individuals within it, who may have perceptions

of personal opportunity more or less at variance

with opportunity for the firm.”

Bridge et al. (1998, p. 190) also point out that

“Inventors are usually individuals, but intrapre-

neurship is frequently carried out by groups or

teams”. This underlines the need of what we have

called a vehicle for entrepreneurship. Regarding

the fostering of innovation they do not only

mention the toleration of failure but add the

reward of success. More generally speaking we

would consider both business culture and incen-

tives as potentially stimulating factors.

Of course there are also dilemmas in corporate

entrepreneurship in so far that there may be an

intrinsic tension between hierarchies and entre-

preneurial behavior. Also there is the appropri-

ability dilemma of individuals that possess “new

knowledge”. The question may be put forward

whether entrepreneurial employees who can

realize their ideas within the firm may be less

likely to create a spin off or start working for

another existing firm. On the other hand a firm

may have to explicitly offer the option of spinning

off when it wants to keep and attract entrepre-

neurial employees.

Regarding the possible effects of corporate

entrepreneurship we conclude that it plays an

essential role in the process of strategic renewal

of large and incumbent firms. It can be associated

with the typical growth enhancing features of

entrepreneurial behavior: alertness, finding new

product-market combinations and innovation. In

the short run corporate entrepreneurship can occur

simultaneously with corporate downsizing, which

is associated with the process of job destruction.

In the long run though, it is expected to stimulate

competitiveness and sales growth of the firm.

Furthermore, viewed in a macro-economic per-

spective downsizing creates opportunities for

growth by enhancing the creation of new ventures.

Wherever entrepreneurial employees reap the

benefits of their abilities, within the firm or in a

spin-off, their activities are likely to enhance

growth at the macro-level.

There seems to be a strong case to hypothesize

a positive impact of corporate entrepreneurship on

economic growth. On the other hand corporate

entrepreneurship remains an elusive concept.

Innovative empirical research will therefore be

needed to investigate this hypothesis. In that

respect it will be necessary to develop a scale for

measuring corporate entrepreneurship.

Conclusion

In this section we assert that entrepreneurship

occurs irrespective of the size of organizations.

A crucial element in organizing corporate entre-

preneurship is the necessity of an organizational

“vehicle” such as teams, business units or other

Linking Entrepreneurship and Economic Growth 45

ways of decentralization. This is sometimes called

“mimicking smallness”. Corporate entrepreneur-

ship may also stimulate spin-offs. Our conclusions

are summarized in Table III.

5. Synthesis

We have investigated the relationship between

entrepreneurship and economic growth from

various perspectives: historical views on entre-

preneurship, macro-economic growth theory,

industrial economics (in particular, Porter’s

competitive advantage of nations), evolutionary

economics, history of economic growth (in par-

ticular, rise and fall of nations) and the manage-

ment literature on large corporate organizations.

The challenge is to synthesize these insights to

provide a broad picture of how economic growth

is linked to entrepreneurship. We will do so

defining entrepreneurship and considering its

inherent heterogeneity. We will present a frame-

work for linking economic growth to entrepre-

neurship while including conditions for

entrepreneurship. This framework is meant to help

setting an agenda for further research.

5.1.

Definition of entrepreneurship

At least three levels of analysis can be distin-

guished when discussing the relationship between

entrepreneurship and economic growth: the level

of the individual entrepreneurs operating on their

own or in teams and partnerships, the firm level

and the aggregate levels of industries, regions and

national economies. Basically, entrepreneurship

has to do with activities of individual persons. The

concept of economic growth is relevant at levels

of firms, industries and nations. Linking entre-

preneurship to economic growth means linking the

individual level to the aggregate levels.

First we will define entrepreneurship. Inspired

by Hébert and Link (1989), Bull and Willard

(1993) and Lumpkin and Dess (1996), we propose

the following definition of entrepreneurship:

Entrepreneurship is the manifest ability and will-

ingness of individuals, on their own, in teams,

within and outside existing organizations, to:

– perceive and create new economic opportuni-

ties (new products, new production methods,

new organizational schemes and new product-

market combinations) and to

– introduce their ideas in the market, in the face

of uncertainty and other obstacles, by making

46 Sander Wennekers and Roy Thurik

TABLE III

Conclusions regarding individual and corporate entrepreneurship

Framework Individual entrepreneurship Corporate entrepreneurship

Conditions – national culture: open-mindedness, – business culture: open-mindedness,

acceptance of risk, etc. proactiveness, trust in employees etc.

– institutions: property rights, incentives, – internal rules and procedures, incentives

competition rules, entry barriers

Entrepreneurship – personal traits: alertness, creativity, – idem

ambition, perseverance

– vehicle: smallness (autonomous role of – vehicle: mimicking smallness (autonomous

owners of small firms) role of entrepreneurial individuals through

teams and business units)

– manifestations or behavior: newness through – manifestation or behavior: newness through

innovation, entry of new markets, start-ups innovation, entry of new markets, spin-offs,

joint ventures

Intermediate linkages – domestic and international competition – idem

between entrepreneurial – variety and selection of viable ideas and – variety and selection of viable ideas and re-

actions and performance replacement of obsolete enterprises engineering of corporations

Economic growth – higher productivity; new niches and – higher productivity; improving best

industries practice; new industries

– international competitiveness – idem

decisions on location, form and the use of

resources and institutions.

Essentially, entrepreneurship is a behavioral char-

acteristic of persons. This behavior has an input

and an output side: where on the one hand entre-

preneurial behavior requires entrepreneurial skills

and qualities, it also implies the participation in

the competitive process on the other.

It should be noted that entrepreneurship is not

an occupation and that entrepreneurs are not a

well-defined occupational class of persons. Even

obvious entrepreneurs may exhibit their entrepre-

neurship only during a certain phase of their career

and/or concerning a certain part of their activi-

ties. In this respect we agree with Gartner (1988,

p. 64) who asserts that “The entrepreneur is not a

fixed state of existence, rather entrepreneurship

is a role that individuals undertake to create

organizations”. See also Schumpeter (1934, p. 78)

who states “Because being an entrepreneur is not

a profession and as a rule not a lasting condition,

entrepreneurs do not form a social class in the

technical sense as, for example, landowners or

capitalists or workmen do”.

Entrepreneurship is not synonymous with small

business. Certainly, small firms are an outstanding

vehicle by which individuals can channel their

entrepreneurial ambitions. The small firm is an

extension of the individual who is in charge

(Lumpkin and Dess, 1996, p. 138). However, as

we have seen, entrepreneurship is not restricted

to persons starting or operating an (innovative)

small firm. Enterprising individuals in large firms,

the so-called “intrapreneurs” or “corporate entre-

preneurs”, undertake entrepreneurial actions as

well. In these environments there is a tendency of

“mimicking smallness”, for instance using

business units, subsidiaries or joint ventures.

Strictly speaking, entrepreneurship is a behav-

ioral characteristic of persons. By creating oppor-

tunities for entrepreneurial behavior of their

employees, organizations can also become entre-

preneurial. In the popular press Europe’s current

economic problems are often attributed to a lack

of entrepreneurial firms. This term is sometimes

used also in the academic literature. See Audretsch

(1995), Audretsch and Thurik (1997 and 1998)

and Carree et al. (1999).

Our survey suggests that entities at the macro

level such as industries, cities, regions and nations

can be entrepreneurial to a certain extent.

Therefore, we need to define and operationalize

concepts of entrepreneurship at the aggregate

levels of firms, industries and nations. These

concepts are usually intuitive and need further

developing. Probably, entrepreneurship at these

levels of analysis is a multidimensional concept.

Where entrepreneurs tend to reside at the tails of

the distribution of the dimensions of personal

characteristics, entrepreneurship is an inherent

complex phenomenon to capture. The develop-

ment of these concepts should be the subject of

future, probably multidisciplinary, research.

5.2.

Measuring entrepreneurship

Clearly, it is difficult to measure entrepreneurship,

both at the individual level and at the aggregate

level. The concepts involved have to be opera-

tionalized. Meanwhile proxies are needed to help

researchers and policy makers to take their

bearings. At the aggregate level it seems pragmatic

to count numbers. However, because in colloquial

speech many terms like entrepreneurs, self-

employed and businessmen are used indiscrimi-

nately, it is not immediately clear which numbers

to count.

However, we can make some pragmatic dis-

tinctions. First, we distinguish between the

concepts

entrepreneurial, as defined in section 5.1,

and

managerial in the sense of organizing and

coordinating. Secondly, we make a distinction

between business-owners or

self-employed

(including owner-managers of incorporated

firms)

and employees. Based on this double

dichotomy of self-employed versus employee and

entrepreneurial versus managerial, three types of

entrepreneurs may be distinguished. These three

types are the Schumpeterian entrepreneurs, the

Linking Entrepreneurship and Economic Growth 47

TABLE IV

Three types of entrepreneurs

Self-employed Employee

Entrepreneurial

Schumpeterian Intrapreneurs

entrepreneurs

Managerial Managerial business Executive

owners managers

intrapreneurs and the managerial business owners

who are entrepreneurs in a formal sense only. This

is illustrated in Table IV.

Schumpeterian entrepreneurs are to be found

mostly in small firms. They own and direct

independent firms that are innovative and cre-

atively destroy

existing market structures. After

realizing their goals Schumpeterians often develop

into managerial business owners, but some may

again start new ventures or new firms.

Intrapreneurs or entrepreneurial managers also

belong to the core of real entrepreneurship. By

taking commercial initiatives on behalf of their

employer, and by risking their time, reputation and

sometimes their job in doing so, they are the

embodiment of leadership resulting in entrepre-

neurial ventures in larger firms. Sometimes these

entrepreneurial employees, either in teams or on

their own, spin off, start new enterprises and

become Schumpeterian entrepreneurs.

Managerial

business owners (entrepreneurs in a formal sense)

are to be found in the large majority of small

firms. They include many franchisees, shop-

keepers and people in professional occupations.

They belong to what Kirchhoff (1994) calls “the

economic core” and sometimes entrepreneurial

ventures grow out of them.

While the managerial business owners fulfill

many useful functions in the economy such as the

organization and coordination of production and

distribution, they cannot be viewed as the engine

of innovation and creative destruction. This is the

major function of Schumpeterian entrepreneurs

and intrapreneurs. How all three groups can make

a contribution to economic growth, we will briefly

touch upon in section 5.3.

First however we want to consider the feed-

backs from economic development to both the

total number of self-employed and the number of

real entrepreneurs (the sum of Schumpeterians and

intrapreneurs). Figure 3 illustrates in a tentative

way how these numbers may depend on the stage

of economic development.

Figure 3 is based upon the assumption that the

number of self-employed includes an unknown but

probably relatively modest share of Schumpeterian

entrepreneurs. Clearly, this share depends on

various historical, institutional and structural

factors. Up to the late 1970s, most industrialized

economies experienced a long period of secular

decline in the number of self-employed per

population. Since the late 1970s the number of

self-employed in several of these countries is

increasing again (Wildeman et al., 1998). This

mirrors both a resurgence of entrepreneurship in

the intrinsic sense (Schumpeterian entrepreneur-

ship) as well as an increase of franchisees and

marginal start-ups.

Further evidence of this U-shaped trend of self-

employment rates over time (1965–1990) is pre-

sented in Acs, Audretsch and Evans (1994).

their analysis a U-shaped trend is a net effect of

Sander Wennekers and Roy Thurik

Figure 3. The hypothesized number of self-employed and of real entrepreneurs.

(among others) the negative influence of rising per

capita income and a positive one of the rising

share of the service sector. Further research should

dig more deeply into this relationship between

economic development and this U-shaped trend

(Carree et al., 1999). To what extent do stages of

economic development matter? And to what extent

is economic development over specific time

intervals

involved?

In Figure 3 it is hypothesized that the number

of real entrepreneurs will increase even more

steeply. It is hypothesized that the revival of

Schumpeterian start-ups the Western world is now

experiencing is matched or even surpassed by an

upsurge of intrapreneurship in its many forms.

The number of self-employed is the only

yardstick of entrepreneurship because statistical

information is available only along the ownership

dimension. This can be misleading. For instance,

it is unknown whether the relatively high number

of self-employed in Italy as compared to the

Netherlands expresses a high level of

Schumpeterian entrepreneurship or merely a time-

lag in economic development influencing the

number of marginal establishments. In recent

empirical studies other approximations are brought

forward. Audretsch (1995) uses the employment

share of surviving young firms as a proxy for

entrepreneurial activity in manufacturing indus-

tries. This variable may well express the compar-

ative entrepreneurial positions of these industries.

Outside the manufacturing sector this variable may

be biased due to the occurrence of franchising

firms and marginal or part-time start-ups.

Audretsch and Thurik (1997) and Carree and

Thurik (1998) use the share of small firms as

proxies. Also these proxies have obvious short-

comings. Moreover, the rate of intrapreneurship,

both in new and incumbent firms, is still lacking

in these approaches.

The number of real entrepreneurs would

approach the level of entrepreneurial activity more

closely. Measuring their number will necessitate

further conceptual development taking into

account personal capabilities and a wide array of

behavioral aspects. This implies a need to define

typologies of entrepreneurs, for instance based on

entrepreneurial dimensions (Lumpkin and Dess,

1996) and on the vehicle they use for materializing

their goals.

Of course counting numbers, in however

sophisticated a manner, will always remain an

approximation of the rate of entrepreneurship.

Hopefully other ways can be found to measure the

intensity of entrepreneurial activity.

5.3.

Linking entrepreneurship to economic growth

5.3.1. Views in the economic literature

Entrepreneurship is “at the heart of national

advantage” (Porter, 1990, p. 125). It is of eminent

importance for carrying out innovations.

Concerning the role of entrepreneurship in stimu-

lating economic growth, many links have been

discussed. Both the role of the entrepreneur in

carrying out innovations and in enhancing rivalry

are important for economic growth. Our assess-

ment of the role of entrepreneurship as expressed

in several fields of research which we have drawn

from (such as historical views; management

literature; growth theory; evolutionary economics),

is shown in Table V. Competition is interpreted

in the broad sense: contestability of markets,

domestic rivalry and international competition.

In the historical views of the Schumpeterians

and the Austrians entrepreneurship is explicitly

relevant for explaining economic growth. On the

other hand, the neo-classicals have no explicit

room for the role of an active entrepreneur. The

endogenous growth theory may offer new theo-

retical perspectives for entrepreneurship. As yet

it does not offer many concrete starting-points.

Economic history is the foremost field in which

entrepreneurship is considered crucial for the

economic growth of nations. On the micro-

economic level the management literature of large

organizations devotes explicit attention to the

importance of entrepreneurship for performance.

Porter’s work offers distinctive starting points for

the role of entrepreneurship in explaining

economic development and growth of nations.

Entrepreneurship can be attached to the determi-

nants of his “diamond”. In the work of Eliasson

entrepreneurship is also considered crucial for

economic growth.

5.3.2.

Final framework

Figure 4 presents our final framework inspired by

the many insights reaped from the fields of liter-

ature. In discussing this framework we concentrate

Linking Entrepreneurship and Economic Growth 49

on entrepreneurship, economic growth and what

links them together. We also take into account

some wider ranging relationships. As we have

seen in section 5.1, it is crucial that three levels

of analysis be distinguished. More precisely,

linking entrepreneurship to economic growth also

means linking the individual level to the firm and

the macro level

Strictly speaking, entrepreneurship as defined

in section 5.1, is a concept operational at the indi-

vidual level. While requiring skills and other qual-

ities, essentially entrepreneurship has to with

behavior.

Entrepreneurial action takes us to the firm level.

Entrepreneurs need a vehicle transforming their

personal qualities and ambitions into actions.

Small firms where the entrepreneur has a control-

ling stake provide such a vehicle. Larger firms

often mimic smallness (using organizational forms

like business units, subsidiaries and joint ventures)

to introduce corporate entrepreneurship. The

outcome of these entrepreneurial manifestations at

the firm level generally has to do with newness.

This can be newness through product, process and

organizational innovation, entry of new markets

and innovative business start-ups.

At the aggregate level of industries, regions and

national economies the many individual entrepre-

neurial actions compose a mosaic of new experi-

ments. In evolutionary terms this can be called

variety. A process of competition between these

various new ideas and initiatives takes place

continuously, leading to the selection of the most

viable firms and industries. Variety, competition,

selection and also imitation (for the latter see

Baumol, 1993a, p. 260) expand and transform the

productive potential of a regional or national

economy (by replacement or displacement of

obsolete firms, by higher productivity and by

expansion of new niches and industries). They

enhance its international competitiveness and

thereby its market share. Viewed from within a

closed economy or the world economy as a whole,

one could say that the additional productive poten-

tial in a competitive environment would create its

own demand.

We assume that the outcome of this

chain of variables linking the individual level to

the macro level, will be economic growth.

In this process Schumpeterian entrepreneurs,

intrapreneurs and managerial business owners all

play their part. Assuming that the secular trends

in Figure 3 may be regarded as equilibrium rates,

this implies “optimal” proportions for both real

entrepreneurs and self-employed.

Deviations

from these rates can be expected to frustrate the

growth rate of an economy. A shortage of real

entrepreneurs will hamper innovation, whereas a

glut of self-employed may result in an average

scale of business below optimum levels. Besides

both the number of real entrepreneurs and that of

Sander Wennekers and Roy Thurik

TABLE V

Assessment of the role of entrepreneurship, drawn from several fields of research

Field of literature Specific domain Competition Innovation Firm start-ups Importance of

entrepreneurship for

economic growth

Historical views Schumpeter/Baumol ++ +++ + ++

Neo-classicals ++ + 0 +

Austrians ++ + 0 ++

Endogenous growth theory + +++ 0 +

Economic history ++ +++ + +++

Management literature + +++ ++ ++

Industrial economics Porter +++ +++ ++ +++

Evolutionary economics Eliasson +++ +++ +++ +++

0 Not present in the writings.

+ Implicitly present in the writings.

++ Explicitly present in the writings.

+++ Pivotal element in the writings.

self-employed may influence the intensity of com-

petition.

Next to the linkages from the individual level

to the aggregate level, it is likely that there are

important feedback mechanisms. Competition and

selection amidst variety undoubtedly enable

individuals (and firms) to learn from both their

own and other’s successes and failures.

These

learning processes enable individuals to increase

their skills and adapt their attitudes. The outcome

of these so-called spillovers will be new entre-

preneurial actions, creating a recurrent chain of

linkages.

Clearly, the outcome of these dynamic

processes depends on a set of conditions referred

to in Figure 4. Given the psychological endow-

ments of the population, conditions refer to the

environment in which an individual carries out his

or her entrepreneurial activities. First, this refers

to the national (or regional) cultural environment,

and to the internal culture of corporations. The

linkages between culture and entrepreneurship are

by no means simple and straightforward, and

much is still unknown about these processes. As

we have seen in section 3, the history of the rise

and fall of nations has shown that cultural vitality,

thriving sciences and high tide in entrepreneurship

often coincide. Second, the institutional frame-

work, both on the national level and within firms,

defines the incentives for individuals to turn their

ambitions into actions, and determines to what

extent unnecessary barriers will hamper them. The

importance of institutions for the development of

entrepreneurship is paramount and deserves

further study.

5.4.

Research conclusions

Entrepreneurship matters. In modern open

economies it is more important for economic

growth than it has ever been. The reason is that

globalization and the ICT-revolution imply a need

for structural change, requiring a substantial real-

location of resources. This induces an intense

demand for entrepreneurship (Audretsch and

Thurik, 1998 and Casson, 1995, p. 94). When it

comes to how the mechanisms operate, little is

known, either on how entrepreneurship can best

be promoted or on how entrepreneurship influ-

ences economic performance. Our paper has to be

viewed in exactly this broader framework of unan-

swered questions. It attempts to be a starting point

for an agenda of research into the field of entre-

preneurship and economic development. In for-

mulating such an agenda, we propose to

distinguish three main fields of research.

Linking Entrepreneurship and Economic Growth 51

Figure 4. Final framework: linking entrepreneurship to economic growth.

The first field is that of measuring entrepre-

neurship. Much work has yet to be done in two

directions. First, that of the development of

typologies of entrepreneurship at the micro level.

Second, that of operationalization of a multi-

dimensional concept of entrepreneurship at higher

levels of aggregation such as industries and

national economies; possibly a scale can be devised

tracking the amount of entrepreneurship over time

or comparing it between national economies.

The

second field is that of the determinants of

entrepreneurship. Both culture and the institutional

framework are important conditions codetermining

the amount of entrepreneurship in an economy and

the way in which entrepreneurs operate in practice.

But also technological, demographic and eco-

nomic forces are at play.

Several questions

remain, such as

– how do cultural variables influence the deci-

sions of individuals to start a business, and how

do cultural variables interact with economic and

technological developments or with policies

designed to promote entrepreneurship; what is

the role of the educational system in this

respect?

– how do differences in incentive structures con-

tribute to the explanation of differences in

entrepreneurship?

– which role is played by business dynamics

(entry and exit) originating from deviations

between the actual and an equilibrium rate of

self-employment (entrepreneurship)?

Future research should attempt to explain the

statistical number of the self-employed, but will

also have to deal with explaining more qualita-

tive aspects such as the rise of Schumpeterian

entrepreneurship and that of intrapreneurship.

The

third field is that of the impact of entre-

preneurship on economic development. This major

field opens up many highly relevant questions for

research, both at the level of firm performance and

that of the development of industries and national

economies:

– knowing that many new start-ups fail and that

only few develop into gazelles, which then are

the major determinants of failure, of mere

survival and of real success?

– which specific contributions to the post war

performance of national economies were made

by Schumpeterian entrepreneurship, intrapre-

neurship and self-employment, respectively;

which role have institutions and policies

played?

– how can the results of these studies be incor-

porated in the econometric models

which are

now being used in policy analysis?

Acknowledgements

The authors would like to thank Folkert Buis for

his contributions, in particular to the references

system and to sections two and four. They are also

grateful to David Audretsch for his comments and

encouragement while visiting EIM in 1996 and

1997 and to three anonymous referees.

Notes

De Koning en Snijders (1992) provide an overview of the

various public policies in countries of the European Union

which have been introduced during the 1980s. You (1995)

attempts to use various lines of economic theory in explaining

the shift. Finally, Carree (1997) brings it all together in his

extensive survey of the determinants of the shift building upon

the literature of the determinants of firm size and firm-size

distribution and complemented with empirical material.

See Davis, Haltiwanger and Schuh (1996), Carree and

Klomp (1996) and Kleijweg and Nieuwenhuijsen (1996) for

a recent discussion.

Equating the growth of entrepreneurship by the number of

new firm start-ups and taking the Netherlands, for which we

have reliable figures, as an illustration, we observe that the

number of new start-ups in the Netherlands almost doubled

between 1986 and 1994. See Wennekers (1997).

Here we differ from Kirchhoff (1994, p. 37 and p. 62).

As Lazonick (1991, p. 309) points out, the neo-classicals

in fact use the terms “entrepreneur” and “manager” inter-

changeably.

These roles are also corroborated by colloquial speech in

Germanic languages such as Dutch and German. The first

meaning of the Dutch word “ondernemen” is “to undertake”

but it also means “to dare”, “to attempt” and “to start”.

See Wennekers (1997) for more information about this

revival.

Schumpeter’s “Theory of Economic Development” was

published in German in 1911, and in English in 1934.

See Schumpeter (1996), which was first published in 1943.

Important publications concerning “the rise and fall of

nations” include Cipolla (1981), Jacobs (1984), Landes (1969),

Lewis (1955), Mokyr (1990), North and Thomas (1973), Olson

(1982) and Wiener (1981). A useful survey is presented in

De Jong and Van Paridon (1989).

“Stadtluft machts frei” (Cipolla. p. 146).

52 Sander Wennekers and Roy Thurik

For a partly conflicting view on the quality of British

entrepreneurship in the period 1870-1914, see Pollard who

argues: “In short, some failures there undoubtedly were, but

they were surely not characteristic of the period as a whole.

The entrepreneurs who had got to the top in late Victorian and

Edwardian Britain could hold their own with the very best

abroad” (Pollard, 1994, p. 89).

The economic problems that many countries in East Asia

are presently facing do not nullify their remarkable growth

performance in the past decades. It is yet too early to decide

whether the present setback is temporary or is another example

of “rise and fall”.

This publication builds upon Hofstede (1980) but also

includes new material.

Weber’s essay was first published in German in

1904–1905.

Also see Witt (1993).

Also see Magnusson (1994).

We will focus our discussion on entrepreneurship in large

firms, but note that there is also a literature on “entrepreneurial

government” (see Osborne and Gaebler, 1992).

See also Acs et al. (1999).

For instance, when Greece will have reached the 1990

per capita income of the U.S.A., its number of self-employed

will also have been influenced by global technological and

cultural trends. Besides, country-specific demographic, social

and institutional conditions will be relevant for its number of

self-employed.

Cf. Say’s law.

As the figure indicates there will also be an outcome at

the individual level (self-realization and personal wealth) and

at the firm level (performance).

There is an analogy with the work of Allen (1988, p. 116)

who asserts that the success of the overall system is deter-

mined by the balanced existence between “stochasts” (repre-

senting the adaptive capacity) and “cartesians” (representing

efficient performance).

Also see Dosi (1988, p. 235).

For an overview of possible determinants of the level of

entrepreneurship, see Wennekers (1997).

These models will have to incorporate the two-way rela-

tionship between entrepreneurship and economic development.

See Carree et al. (1999).

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Linking Entrepreneurship and Economic Growth 55

The quantifiable impact of 2007-2022 on students' intentions to become entrepreneurs and the implications for research and start-up activities

Article

Full-text available

Jun 2024

Utilizing bibliometric analysis, this study identifies academic gaps, research trends, and data pertaining to student entrepreneurial activities. The authors conducted a qualitative analysis of 984 selected studies from the Google Scholar database. Data that have been analyzed include trends in publishing years, the number of papers published, the number of citations, and frequently used keywords in research on students' intentions to start their own enterprises from 2007 to 2022. Additionally, by developing network visualizations, co-authorship network maps, and keyword co-occurrence network maps over a 15-year period (2007-2022), this study validates how well biometric analysis works. In this study, VOSviewer's mapping capabilities helped identify six clusters (a rise in study themes, hot themes, notable authors, eminent journals, publications, and primary research directions). The study's findings aid in directing future research into entrepreneurship and provide policymakers and directors with relevant takeaways for encouraging student entrepreneurship intentions.

Exploring the Impact of Sustainable Economic Growth and Financial Development to Instigate Entrepreneurial Activities for Global Sustainability

Article

May 2024

Abaidullah

Entrepreneurship stands out in the diverse range of human pursuits, characterized by bold aspirations, steadfast determination, and a transformative mindset. This is the place where hurdles are transformed into bridges, uncertainties drive invention, and fear is replaced by bold jumps. Entrepreneurs use transmutation to convert ordinary things into extraordinary ones, creating paths to growth and sparking positive impact for everyone. This study aims to find the impact of economic growth, trade openness, and human capital on entrepreneurial activities. The study uses Ordinary Least Square (OLS), Fixed Effects (FE), and Generalized Methods of Movement (GMM) estimation techniques to the annual unbalanced panel data of 217 countries from 1999 to 2022. The findings of this study show that economic growth instigate entrepreneurial activities. The GMM results from the table of baseline results show that one-unit change in economic growth brings 0.030 units positive and significant change in new business density which indicates that higher economic growth rate is connected with a higher rate of entrepreneurial activities. It demonstrates that the level of entrepreneurial activities in different economies around the world grows as the economic growth of those economies increases. On the other hand, the results of GMM show that the one-unit change in interaction terms of financial development with economic growth show 0.332 units positive and significant change entrepreneurial activities. These findings indicate that financial development plays an essential moderating role in instigating entrepreneurial activities. The study provides guidance to the individuals, institutions, policymakers, researchers and all the stakeholders who want to take initiatives for business activities.

IMPACT OF ENTREPRENEURSHIP DEVELOPMENT ON EMPLOYMENT GENERATION IN SABONGARI LOCAL GOVERNMENT, KADUNA STATE

Research

Full-text available

Jun 2024

Fauziyya Rabiu Mohammed

The study examined the impact of entrepreneurship development on employment generation via the lens of binary logit regression in Sabon Gari Local Government, Kaduna State.

Does Entrepreneurship Development Generate Income? Evidence from Sabon Gari Local Government Area, Kaduna State, Nigeria

Article

Full-text available

Jan 2022

Fauziyya Rabiu Mohammed

Purpose: The high incidence of poverty, unemployment and low income in Nigeria has remained a major source of concern. Despite the deployment of several entrepreneurial initiatives by government and non-government entities, income generally remains low and this has been magnified by the high rate of youth unemployment in the country. While previous studies have examined the role of entrepreneurship towards job creation, improving welfare, and boosting shared prosperity, the intervening role that income plays in these relationships has not been given adequate attention especially in the context of primary data analysis. This prompted this study to examine the impact of entrepreneurship development on income generation using Sabon Gari Local Government Area of Kaduna State as a case study. Methodology: The data were randomly collected from 331 entrepreneurs across the study area. Findings: Using cross-tabulation and chi-square statistic, the result showed that there is a positive but insignificant relationship between entrepreneurship development and income generation. This may be explained by the fact that 42% of the 71% entrepreneurs sample and considered as innovators fall within the low-income range. Recommendation: Findings from this paper provide evidence that when government disburses adequate funding to promote entrepreneurship and innovative spirit, as entrepreneurs will be motivated to explore their creative capacity, thus, expanding their businesses which in turn increase their income.

Investigating the impact of tax policies, corruption and government size on necessity-oriented and opportunity-oriented entrepreneurship

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Feb 2024

Does corruption affect the impact of financial development on entrepreneurship? Evidence from emerging economies

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Jun 2024

Purpose: This study examines the relationship between financial development, corruption, and entrepreneurship in a sample of 21 emerging economies from 2008 to 2020. Methodology: Utilizing the Generalized Method of Moments (GMM) econometric approach, we explore the interactive dynamics between these variables. Results: Our findings indicate that higher levels of corruption are associated with increased entrepreneurial activity in these economies. This can be attributed to the prevalence of corrupt practices, such as bribery, which serve as a means for entrepreneurs to overcome barriers and initiate businesses. Conversely, while financial development has a positive influence on entrepreneurship, its impact is not statistically significant. However, when considering a combined effect of financial development and corruption, a positive net impact is observed. This suggests that corruption can facilitate access to financial resources for entrepreneurs in these emerging economies. These findings support the notion of the “grease the wheels effect”. Conclusion: This study provides valuable insights into the complex interplay between financial accessibility, corruption, and entrepreneurship in emerging economies, informing policymakers and stakeholders on strategies to foster entrepreneurship and drive sustainable economic growth.

The role and effectiveness of non-formal training programmes for entrepreneurship in sub-Saharan Africa: a systematic literature review

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Jun 2024

EMPREENDEDORISMO: EVOLUÇÃO HISTÓRICA, DEFINIÇÕES E ABORDAGENS

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Feb 2015

Na difusão da compreensão e entendimento do fenômeno empreendedorismo, este trabalho busca apresentar o estudo de alguns aspectos relevantes e essenciais para o processo de aprendizagem sobre o termo empreendedorismo. São eles: a evolução histórica, os principais conceitos, definições e abordagens. Neste sentido, o objetivo principal foi apresentar o contexto histórico do assunto, bem como as evoluções do campo de pesquisa e seu contexto no desenvolvimento econômico. Com isso, o estudo pretendeu evidenciar por meio de um ensaio teórico, sua evolução e seus reflexos nas pesquisas acadêmicas e na sociedade. A metodologia utilizada foi a pesquisa exploratória de cunho bibliográfico, baseando-se em publicações de diversos Journals que fazem parte da base de dados da CAPES, como também os periódicos RAUSP e RAC, e anais do EGEPE e EnANPAD.

Gendered pathways to entrepreneurial success: a study on women’s career choices in India

Article

May 2024
Int J Sociol Soc Pol

Purpose This research investigates the barriers hindering women from pursuing entrepreneurship as a career choice, particularly in the Indian context. Design/methodology/approach The study employs rigorous data analysis techniques, including Confirmatory Factor Analysis and Multiple Regression Analysis, on a sample of 590 MBA students, comprising both male and female participants. Findings The findings reveal that social and psychological factors significantly influence women’s decisions regarding entrepreneurship. Social factors such as social stigma and cultural norms, along with psychological factors like societal expectations, emerge as major barriers. Research limitations/implications The findings have implications for policymakers, practitioners, and academics in designing interventions to address social and psychological barriers effectively. Recommendations include promoting cultural sensitivity and fostering confidence among women entrepreneurs. Originality/value This study contributes to the existing literature by quantifying the specific barriers faced by women entrepreneurs in India. It offers insights into advancing gender equity and inclusive economic development through targeted policies and programs.

Didaktik der Entrepreneurship Education: Status quo und Verbesserungspotenziale

Article

Full-text available

May 2024

Victor Tiberius

Entrepreneurship Education zielt darauf, Lernende zu Entrepreneur*Innen zu qualifizieren. Der weit überwiegende Teil der internationalen Entrepreneurship-Education-Forschung geht der Frage nach, wie erfolgreich – gemessen an unterschiedlichen Variablen, hauptsächlich der Gründungsabsicht – sie dabei ist. Dabei wird Entrepreneurship Education in der Regel jedoch unzutreffend als homogenes Gut betrachtet. Anstelle der dominierenden Ergebnis-Orientierung, nimmt der vorliegende Beitrag eine Binnenperspektive ein und geht der Forschungsfrage nach, wie Entrepreneurship auf tertiärer Ebene international gelehrt (Status quo) wird und wie die internationale tertiäre Entrepreneurship-Lehre optimiert werden kann (Verbesserungspotenziale) – im Hinblick auf zu identifizierende entrepreneurship-spezifische Lehr-/Lern-Ziele, Lehr-/Lern-Inhalte, Lehr-/Lern-Methoden und Methoden der Lernerfolgskontrolle. Zu diesem Zweck berichtet der Beitrag über fünf Teilstudien und führt diese zu einem holistischen Entrepreneurship-Curriculum zusammen. Der Status quo wird zum einen aus der Perspektive der Entrepreneurship-Education-Forschung durch eine bibliometrische Analyse und – spezifischer – aus der Perspektive des Teilgebiets der curricularen Entrepreneurship-Education-Forschung durch eine systematische Literaturanalyse, zum anderen aus der Perspektive der entrepreneurship-bezogenen Lehrpraxis mit Hilfe einer Curriculumanalyse ermittelt. Verbesserungspotenziale werden aus der Perspektive von Forschung und Lehre durch eine Delphi-Studie unter Entrepreneurship-Professor*Innen sowie aus der Perspektive der unternehmerischen Praxis durch problemzentrierte Interviews mit Unternehmer*Innen erhoben. Der Beitrag schließt mit theoretischen, lehrpraktischen und bildungspolitischen Implikationen sowie einem Forschungsausblick.

Small Business, Entrepreneurship, and Industrial Dynamics

Chapter

Jan 1999

Bo Carlsson

Most firms are small and don’t grow very much. Small firms have lower productivity and shorter life expectancy, pay lower wages, and provide fewer benefits and less employment security than large firms. They create a lot of new jobs, but they also often fail, so that their role as net creators of employment is unclear. Nevertheless, a strong argument can be made that small firms, especially entrepreneurial ones, are important — indeed, indispensable — for long-term economic growth and economic welfare.

Clarifying the Entrepreneurial Orientation Construct and Linking It To Performance

Article

Jan 1996

The primary purpose of this article is to clarify the nature of the entrepreneurial orientation (EO) construct and to propose a contingency framework for investigating the relationship between EO and firm performance. We first explore and refine the dimensions of EO and discuss the usefulness of viewing a firm's EO as a multidimensional construct. Then, drawing on examples from the EO-related contingencies literature, we suggest alternative models (moderating effects, mediating effects, independent effects, interaction effects) for testing the EO-performance relationship.

The Heart of Entrepreneurship

Article

Jan 1985
HARVARD BUS REV

The linkages among entrepreneurship, SMEs and the macroeconomy

Article

Jan 1999

Small Business Economics: A Global Perspective

Article

Nov 1992

Zoltan J. Acs

Markets and Hierarchies: Analysis and Antitrust Implications.

Article

Sep 1976

The Competitive Advantage Of Nations

Book

Oct 1990
HARVARD BUS REV

Porter Michael

With the publication of his best-selling books "Competitive Strategy (1980) and "Competitive Advantage (1985), Michael E. Porter of the Harvard Business School established himself as the world's leading authority on competitive advantage. Now, at a time when economic performance rather than military might will be the index of national strength, Porter builds on the seminal ideas of his earlier works to explore what makes a nation's firms and industries competitive in global markets and propels a whole nation's economy. In so doing, he presents a brilliant new paradigm which, in addition to its practical applications, may well supplant the 200-year-old concept of "comparative advantage" in economic analysis of international competitiveness. To write this important new work, Porter and his associates conducted in-country research in ten leading nations, closely studying the patterns of industry success as well as the company strategies and national policies that achieved it. The nations are Britain, Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, and the United States. The three leading industrial powers are included, as well as other nations intentionally varied in size, government policy toward industry, social philosophy, and geography. Porter's research identifies the fundamental determinants of national competitive advantage in an industry, and how they work together as a system. He explains the important phenomenon of "clustering," in which related groups of successful firms and industries emerge in one nation to gain leading positions in the world market. Among the over 100 industries examined are the German chemical and printing industries, Swisstextile equipment and pharmaceuticals, Swedish mining equipment and truck manufacturing, Italian fabric and home appliances, and American computer software and movies. Building on his theory of national advantage in industries and clusters, Porter identifies the stages of competitive development through which entire national economies advance and decline. Porter's finding are rich in implications for both firms and governments. He describes how a company can tap and extend its nation's advantages in international competition. He provides a blueprint for government policy to enhance national competitive advantage and also outlines the agendas in the years ahead for the nations studied. This is a work which will become the standard for all further discussions of global competition and the sources of the new wealth of nations.

The Entrepreneur in Microeconomic Theory: Disappearance and Explanation

Article

Apr 1991

1. Introduction 2. Entrepreneurial Theories in the History of Economic Thought 3. The Disappearance of the Entrepreuneur from Microeconomic Theory - A History 4. An Explanation of the Disapperance of the Entrepreneur - The Description 5. An Explanation of the Disapperance of the Entrepreneur - The Rationale 6. An Explanation of the Disappearance of the Entrepreneur - The Motivation.

The Theory of Economic Growth

Article

Dec 1956

Principles of economics. Vol. I

Article

Jan 1920

A.F. Marshall

Linking Entrepreneurship and Economic Growth

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