1. Entrepreneurial activity, industry orientation and economic growth
Jaap Bos
(Maastricht University, Faculty of Economics and Business)
Jolanda Hessels
(Erasmus School of Economics and Panteia/EIM)
Mark Sanders
(Utrecht School of Economics)
Peter van der Zwan
(Panteia/EIM and Erasmus School of Economics)
GEM-conference
20-21 June, Barcelona, Spain 1

2. Background Economists interest in economic growth:
Before 1990s: mainly within context of lower-income countries (development economics)
Since 1990s: Increased interest in economic growth in higher-income countries (following Romer/Lucas)
Debate on role of entrepreneurship in economic growth (entrepreneurship, growth and development economics)
GEM-conference
Mark Sanders June, Barcelona, Spain of 17

3. Views on entrepreneurship
Market theory: static equilibrium, no profit opportunities, no room for entrepreneurship
Market process theory: disequilibrium, profit opportunities:
Kirzner (1973): entrepreneurs bring markets in equilibrium by pursuing opportunities (alertness, judgment)
Schumpeter (1934): entrepreneurs bring markets out of equilibrium by doing something new (innovation).
Entrepreneurs act as agents of change by changing output and prices or by doing something new
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4. Views on entrepreneurship
Different functions entrepreneurs (Hébert & Link, 2009); The entrepreneur is:
… a person who assumes risk associated with uncertainty
… an innovator
… a decision maker
… an industrial leader
… an allocator of resources among alternative uses
… an organizer/coordinator of economic resources
… an arbitrageur
… the owner of an enterprise
… an employer of factors of production
… a person who supplies financial capital
… a manager or superintendent
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5. Entrepreneurship and growth
Traditional neoclassical growth theory (Harrod Domar, Lewis); Endogenous growth theory (Romer)
Models of entrepreneurship and growth (Schmitz, 1989; Murphy et al., 1991; Iyigun and Owen, 1999)
Knowledge spillover theory of entrepreneurship (Audretsch and Keilbach, 2004)
Empirical studies: positive relationship entrepreneurship with economic growth in higher income countries
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6. Entrepreneurship and growth
How entrepreneurship contributes to growth:
Schumpeterian Growth Models
Knowledge Spillover Theory of Entrepreneurship
Self-Employment and Self-Realization
Entrepreneurs create value directly and through diversity, knowledge spillovers and competition in markets
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7. Types of entrepreneurship
Segmentation within entrepreneurship:
Employers versus own account workers
Opportunity versus necessity entrepreneurs
Innovators versus imitators
Etc…
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8. Types of entrepreneurship and growth
This paper:
Explore if contribution of entrepreneurs differs by sector of activity.
Explore if contribution of entrepreneur differs across industries and countries by development stage.
Explore who sorts into what sector of activity.
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9. Data Global Entrepreneurship Monitor (GEM): 9 years (2001-2009)
GEM from 1999 onwards; 29 countries in total in 2001; 55 in 2009
78 countries for which TEA rates are known
Total early-stage entrepreneurial activity
20 factor-driven, 27 efficiency-driven, 31 innovation-driven
13 countries participated each year (e.g., Belgium, the Netherlands, UK, US); factor-driven economies mostly only once
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10. TEA rates for UK, NL, US, BE GEM-conference
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11. Decomposition of TEA GEM-conference
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12. Empirical Strategy Empirical growth literature
Cross-country differences  pooled OLS rather than panel regression with fixed or random effects.
Annual GDP growth is regressed on TEA rates in the previous year and usual controls.
Year dummies are included to avoid selection bias.
Correlations, not causality.
By type (3) and development stage (3)
What activity benefits what countries?
Ordered logit on types of entrepreneurship
Usual suspects
Who engages in what activity under what growth regime?
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13. Results For all countries and for all years (n=337)
Overall TEA (log) positive significant influence at 1%
GDP per capita (log) negative significant influence at 5%
When distinguishing between industries:
High-tech TEA (log) significant at 1%
The other industry TEAs are not significantly related to economic growth
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14. Results (2) Distinguishing between stage of development
Factor-driven economies (n=30):
No significant influences for the TEA rates; no and low-tech TEA have negative sign.
Efficiency-driven economies (n=109)
Overall TEA (5%) and high-tech TEA (1%) positive significant, others insignificant.
Innovation-driven economies (n=198)
Overall TEA (5%) positive significant, others insignificant.
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15. Results (3) Who selects into what type of activity?
All countries, individual observations (n=61400):
Male.
Older.
More Educated.
Ambitious.
Opportunity driven.
Further refinements
By development regime
Control for time
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16. Conclusion Preliminary conclusions:
On the importance of high tech entrepreneurship:
Pronounced only in efficiency driven countries
On Entrepreneurship and Growth (in developed countries)
Positive correlation growth and TEA.
On Entrepreneurship and Development (in developing countries)
No impact of TEA in LDCs. Low Quality?
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17. Discussion
Entrepreneurship (TEA) is too coarse a measure to capture relevant entrepreneurial activity:
Importance of institutions (e.g., Boettke and Coyne, 2003): certain institutions (e.g., rule of law) that encourage entrepreneurial aspects must be present
Importance of policies (e.g., Dias and McDermott, 2006): different policies (e.g., education and tax relief for entrepreneurs) work together to achieve growth
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