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Nascent entrepreneurship and the level of economic development

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Author Info
Sander Wennekers
André van Stel ()
Roy Thurik ()
Paul Reynolds

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Abstract

Based upon two strands of literature, this paper hypothesizes a U-shaped relationship between a country's rate of entrepreneurial dynamics and its level of economic development. This would imply a different scope for entrepreneurship policy across subsequent stages of development. Regressing GEM's 2002 data for nascent entrepreneurship in 36 countries on the level of economic development as measured either by per capita income or by an index for innovative capacity, we find support for a U-shaped relationship. Testing our results against several control variables, evidence is again found for this relationship with economic development, in addition to significant effects of the business ownership rate (+), social security expenditure (-), aggregate taxes (+) and population growth (+). The results suggest that a 'natural rate' of nascent entrepreneurship is to some extent governed by 'laws' related to the level of economic development. For the most advanced nations, improving incentive structures for business start-ups and promoting the commercial exploitation of scientific findings offer the most promising approach for public policy. Developing nations, however, may be better off pursuing the exploitation of scale economies, fostering foreign direct investment and promoting management education.

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Publisher Info
Paper provided by Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group in its series Papers on Entrepreneurship, Growth and Public Policy with number 2005-14.

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Length: 36 pages
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:esi:egpdis:2005-14

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Related research
Keywords: Nascent entrepreneurship; economic development;

Other versions of this item:

Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Yamada, Gustavo, 1996. "Urban Informal Employment and Self-Employment in Developing Countries: Theory and Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 44(2), pages 289-314, January.
  2. Heleen Stigter & Niels Bosma & Sander Wennekers, 2002. "The Long Road to the Entrepreneurial Society," Scales Research Reports A200115, EIM Business and Policy Research. [Downloadable!]
  3. Pekka Ilmakunnas & Vesa Kanniainen & Uki Lammi, . "Entrepreneurship, Economic Risks, and Risk-Insurance in the Welfare State," EPRU Working Paper Series 99-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
    Other versions:
  4. Blanchflower, David G., 2000. "Self-employment in OECD countries," Labour Economics, Elsevier, vol. 7(5), pages 471-505, September. [Downloadable!] (restricted)
    Other versions:
  5. David B. Audretsch & A. Roy Thurik, 2000. "Capitalism and democracy in the 21st Century: from the managed to the entrepreneurial economy," Journal of Evolutionary Economics, Springer, vol. 10(1), pages 17-34. [Downloadable!] (restricted)
  6. André van Stel & Roy Thurik & Martin Carree, 2005. "The effect of entrepreneurial activity on national economic growth," Scales Research Reports N200419, EIM Business and Policy Research. [Downloadable!]
    Other versions:
  7. Richard Florida & Zoltan Acs & Sam Youl Lee, 2004. "Creativity and Entrepreneurship: A Regional Analysis of New Firm Formation," Papers on Entrepreneurship, Growth and Public Policy 2004-17, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group. [Downloadable!]
    Other versions:
  8. André van Stel & Roy Thurik & Sander Wennekers & Niels Noorderhaven, 2004. "The role of dissatisfaction and per capita income in explaining self-employment across 15 European countries," Scales Research Reports N200407, EIM Business and Policy Research. [Downloadable!]
    Other versions:
  9. Sander Wennekers, 2006. "Entrepreneurship at Country Level : Economic and Non-Economic Determinants," Scales Research Reports R200602, EIM Business and Policy Research. [Downloadable!]
  10. André van Stel & Roy Thurik & Sander Wennekers & Paul D. Reynolds, 2004. "Explaining variation in nascent entrepreneurship," Scales Research Reports H200401, EIM Business and Policy Research. [Downloadable!]
  11. Paul Reynolds & David Storey & Paul Westhead, 1994. "Cross-national Comparisons of the Variation in New Firm Formation Rates," Regional Studies, Taylor and Francis Journals, vol. 28(4), pages 443-456, July. [Downloadable!] (restricted)
  12. Bleaney, Michael & Nishiyama, Akira, 2002. " Explaining Growth: A Contest between Models," Journal of Economic Growth, Springer, vol. 7(1), pages 43-56, March. [Downloadable!] (restricted)
  13. Murat F. Iyigun & Ann L. Owen, 1997. "Risk, entrepreneurship and human capital accumulation," Finance and Economics Discussion Series 1997-37, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  14. Noorderhaven, N. & Thurik, A.R. & Wennekers, A.R.M. & Stel, A.J. van, 2003. "Self-Employment Across 15 European Countries:," Research Paper ERS-2003-081-ORG Revision, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni. [Downloadable!]
  15. Catherine Armington & Zoltan J. Acs, 2002. "The Determinants of Regional Variation in New Firm Formation," Regional Studies, Taylor and Francis Journals, vol. 36(1), pages 33-45, February. [Downloadable!] (restricted)
  16. Acs, Zoltán J & Audretsch, David B & Evans, David S, 1994. "Why Does the Self-Employment Rate Vary Across Countries and Over Time?," CEPR Discussion Papers 871, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  17. Schultz, T Paul, 1990. "Women's Changing Participation in the Labor Force: A World Perspective," Economic Development and Cultural Change, University of Chicago Press, vol. 38(3), pages 457-88, April.
    Other versions:
  18. Simon C. Parker & Martin T. Robson, 2004. "Explaining International Variations in Self-Employment: Evidence from a Panel of OECD Countries," Southern Economic Journal, Southern Economic Association, vol. 71(2), pages 287-301, October.
  19. David Audretsch & Roy Thurik, 2004. "A Model of the Entrepreneurial Economy," Papers on Entrepreneurship, Growth and Public Policy 2004-12, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group. [Downloadable!]
  20. David Audretsch & Roy Thurik, 1997. "Sources of Growth," Tinbergen Institute Discussion Papers 97-109/3, Tinbergen Institute. [Downloadable!]
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