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The Effects Of Entrepreneurial Activity And Preference For Avoiding Uncertainty On National Economic Growth

Author

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  • Danijela Martinovic

    (University of Sarajevo, Bosnia and Herzegovina)

  • Ljiljan Veselinovic

    (University of Sarajevo, Bosnia and Herzegovina)

  • Almira Arnaut-Berilo

    (University of Sarajevo, Bosnia and Herzegovina)

Abstract

Entrepreneurs play an important role nowadays as well as in the history of economic thought - entrepreneur used to be the one bearing the risk of buying at certain prices and selling at uncertain prices, protagonist of economic activity and innovating so the new combinations of inputs are used in order to create new output. Nevertheless, relationship between entrepreneurial activity and national growth is not so straightforward. This study aims to contribute to the stream of research that tries to uncover the ultimate results of entrepreneurship. This paper seeks to explore influence of TEA in countries that belongs to different categories regarding ‘uncertainty avoidance’ cultural dimension. Our results could not confirm that entrepreneurial activity increases with increase of per capita income. We argue that entrepreneurial activity could contribute to GDP growth regardless of current level of development. We find that the entrepreneurial activity can increase or decrease GDP growth rates depending on level of preferences for uncertainty avoidance. We argue that TEA in countries with lower and higher preferences for uncertainty avoidance will negatively influence the GDP growth. Possible explanation is that less innovative ventures are created in countries with lower preference for uncertainty avoidance thus no considerable influence on GDP could be expected while more ventures fail as the entrepreneurs starts riskier business in the countries with higher preferences for uncertainty avoidance. Countries in the middle of these two extreme values can expect positive effect of TEA on GDP growth since preference for uncertainty is neither too high nor too low. Nevertheless, these results should be taken with caution since not all results were statistically significant. The main limitation is lack of data on entrepreneurial activity for all countries so instead of using TEA in the period preceding the GDP growth, average TEA for 2010-2011 was used.

Suggested Citation

  • Danijela Martinovic & Ljiljan Veselinovic & Almira Arnaut-Berilo, 2017. "The Effects Of Entrepreneurial Activity And Preference For Avoiding Uncertainty On National Economic Growth," Eurasian Journal of Business and Management, Eurasian Publications, vol. 5(2), pages 11-20.
    • Handle: RePEc:ejn:ejbmjr:v:5:y:2017:i:2:p:11-20
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    References listed on IDEAS

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    1. André Stel & Martin Carree & Roy Thurik, 2005. "The Effect of Entrepreneurial Activity on National Economic Growth," Small Business Economics, Springer, vol. 24(3), pages 311-321, February.
    2. R.W. Hafer, 2013. "Entrepreneurship and state economic growth," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 2(1), pages 67-79, April.
    3. Andre van Stel & Martin Carree & Roy Thurik, 2004. "The effect of entrepreneurship on national economic growth: an analysis using the GEM database," Papers on Entrepreneurship, Growth and Public Policy 2004-34, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
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