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The Relationship between Entrepreneurship and Economic Development: Is It U-Shaped?

Author

Listed:
  • Wennekers, Sander
  • van Stel, André
  • Carree, Martin
  • Thurik, Roy

Abstract

Following a centuries-long decline in the rate of self-employment, a discontinuity in this downward trend is observed for many advanced economies starting in the 1970s and 1980s. In some countries, the rate of self-employment appears to increase. At the same time, crosssectional analysis shows a U-shaped relationship between start-up rates of enterprise and levels of economic development. We provide an overview of the empirical evidence concerning the relationship between independent entrepreneurship, also known as self-employment or business ownership, and economic development. We argue that the reemergence of independent entrepreneurship is based on at least two 'revolutions'. If we distinguish between solo self-employed at the lower end of the entrepreneurship spectrum, and ambitious and/or innovative entrepreneurs at the upper end, many advanced economies show a revival at both extremes. Policymakers in advanced economies should be aware of both revolutions and tailor their policies accordingly.

Suggested Citation

  • Wennekers, Sander & van Stel, André & Carree, Martin & Thurik, Roy, 2010. "The Relationship between Entrepreneurship and Economic Development: Is It U-Shaped?," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 6(3), pages 167-237, July.
    • Handle: RePEc:now:fntent:0300000023
    DOI: 10.1561/0300000023
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    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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