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Modelling Entrepreneurship: Unifying The Equilibrium and Entry/Exit Approach

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  • Niels Bosma
  • Gerrit Wit
  • Martin Carree

Abstract

Two approaches can be distinguished with respect to modelling entrepreneurship: (i) the approach focusing on the net development of the number of entrepreneurs in an equilibrium framework and (ii) the approach focusing on the entries and exits of entrepreneurs. In this paper we unify these approaches to arrive at a model explaining the equilibrium and actual number of entrepreneurs and the entry and exit rate of entrepreneurs simultaneously and consistently. We apply our unified approach to the Netherlands using self-employment data for the 1960–1999 period. We find error-correction of about 20% per year and a very different situation in terms of disequilibrium before and after the early 1980s. Periods of high unemployment appear to be characterized by both high entry and high exit rates. Copyright Springer 2005

Suggested Citation

  • Niels Bosma & Gerrit Wit & Martin Carree, 2005. "Modelling Entrepreneurship: Unifying The Equilibrium and Entry/Exit Approach," Small Business Economics, Springer, vol. 25(1), pages 35-48, August.
    • Handle: RePEc:kap:sbusec:v:25:y:2005:i:1:p:35-48
    DOI: 10.1007/s11187-005-4256-x
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    Citations

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    Cited by:

    1. André van Stel & Andrew Burke, 2008. "The Entrepreneurial Adjustment Process in Disequilibrium," Scales Research Reports H200809, EIM Business and Policy Research.
    2. Thomas Gries & Wim Naudé, 2009. "When to Start a New Firm?: Modelling the Timing of Novice and Serial Entrepreneurs," WIDER Working Paper Series RP2009-39, World Institute for Development Economic Research (UNU-WIDER).
    3. Burke, A.E. & van Stel, A.J. & Thurik, A.R., 2009. "Blue Ocean versus Competitive Strategy: Theory and Evidence," ERIM Report Series Research in Management ERS-2009-030-ORG, 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 University Rotterdam.
    4. Wentao Gu & Xuzheng Qian & Junpeng Lu, 2018. "Venture capital and entrepreneurship: a conceptual model and research suggestions," International Entrepreneurship and Management Journal, Springer, vol. 14(1), pages 35-50, March.
    5. Katharina Pijnenburg, 2013. "Self-Employment and Economic Performance: A Geographically Weighted Regression Approach for European Regions," Discussion Papers of DIW Berlin 1272, DIW Berlin, German Institute for Economic Research.
    6. Jacob Hörisch & Jana Kollat & Steven A. Brieger, 2017. "What influences environmental entrepreneurship? A multilevel analysis of the determinants of entrepreneurs’ environmental orientation," Small Business Economics, Springer, vol. 48(1), pages 47-69, January.
    7. André van Stel & Roy Thurik & Andrew Burke, 2008. "Investigating Blue Ocean v. Competitive Strategy: A Statistical Analysis of the Retail Industry," Scales Research Reports H200801, EIM Business and Policy Research.
    8. Wim Naudé, 2008. "Entrepreneurship in Economic Development," WIDER Working Paper Series RP2008-20, World Institute for Development Economic Research (UNU-WIDER).
    9. Braunerhjelm, Pontus, 2010. "Entrepreneurship, Innovation and Economic Growth – Past experiences, current knowledge and policy implications," Working Papers 2010:2, Swedish Entrepreneurship Forum.
    10. Thomas Gries & Wim Naudé, 2008. "Entrepreneurship and Regional Economic Growth: Towards A General Theory of Start-Ups," WIDER Working Paper Series RP2008-70, World Institute for Development Economic Research (UNU-WIDER).
    11. Jacqueline Chattopadhyay, 2018. "State Health Insurance Regulation and Self-Employment Rates After the Great Recession: The Role of Guaranteed Issue Mandates," Economic Development Quarterly, , vol. 32(1), pages 78-92, February.

    More about this item

    Keywords

    entrepreneurship; entry and exit; error correction; C32; L11; M13;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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