IDEAS home Printed from https://ideas.repec.org/a/now/fntent/0300000023.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1561/0300000023
    Download Restriction: no
    File URL: https://libkey.io/10.1561/0300000023?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andreas Freytag & Roy Thurik, 2010. "Entrepreneurship and its Determinants in a Cross-Country Setting," Springer Books, in: Andreas Freytag & Roy Thurik (ed.), Entrepreneurship and Culture, chapter 0, pages 157-170, Springer.
    2. Paul Reynolds & Niels Bosma & Erkko Autio & Steve Hunt & Natalie De Bono & Isabel Servais & Paloma Lopez-Garcia & Nancy Chin, 2005. "Global Entrepreneurship Monitor: Data Collection Design and Implementation 1998–2003," Small Business Economics, Springer, vol. 24(3), pages 205-231, February.
    3. David B. Audretsch & Isabel Grilo & A. Roy Thurik (ed.), 2007. "Handbook of Research on Entrepreneurship Policy," Books, Edward Elgar Publishing, number 3856.
    4. Blanchflower, David G., 2000. "Self-employment in OECD countries," Labour Economics, Elsevier, vol. 7(5), pages 471-505, September.
    5. David Audretsch & Max Keilbach, 2004. "Entrepreneurship Capital and Economic Performance," Regional Studies, Taylor & Francis Journals, vol. 38(8), pages 949-959.
    6. Michael C. Jensen, 2010. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 43-58, January.
    7. André van Stel & Martin Carree, 2002. "Business ownership and sectoral growth," Scales Research Reports H200206, EIM Business and Policy Research.
    8. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
    9. 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.
    10. David B. Audretsch & Max Keilbach, 2006. "Entrepreneurship, Growth and Restructuring," Papers on Entrepreneurship, Growth and Public Policy 2006-13, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    11. Ingrid Verheul & Sander Wennekers & David Audretsch & Roy Thurik, 2001. "An Eclectic Theory of Entrepreneurship: Policies, Institutions and Culture," Tinbergen Institute Discussion Papers 01-030/3, Tinbergen Institute.
    12. 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.
    13. Sander Wennekers & Andre van Stel & Niels Noorderhaven & Roy Thurik, 2004. "The Role Of Dissatisfaction And Per Capita Income In Explaining Self-Employment Across 15 European Countries," Papers on Entrepreneurship, Growth and Public Policy 2004-11, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    14. C. Praag & Peter Versloot, 2007. "What is the value of entrepreneurship? A review of recent research," Small Business Economics, Springer, vol. 29(4), pages 351-382, December.
    15. 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.
    16. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-1152, December.
      • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
      • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
    17. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    18. Havnes, Pers-Anders & Senneseth, Knut, 2001. "A Panel Study of Firm Growth among SMEs in Networks," Small Business Economics, Springer, vol. 16(4), pages 293-302, June.
    19. Martin Carree & André Van Stel & Roy Thurik & Sander Wennekers, 2007. "The relationship between economic development and business ownership revisited," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 19(3), pages 281-291, May.
    20. Fonseca, Raquel & Lopez-Garcia, Paloma & Pissarides, Christopher A., 2001. "Entrepreneurship, start-up costs and employment," European Economic Review, Elsevier, vol. 45(4-6), pages 692-705, May.
    21. Acs, Zoltan J & Audretsch, David B, 1987. "Innovation, Market Structure, and Firm Size," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 567-574, November.
    22. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-452, May.
    23. Siri Terjesen & Jolanda Hessels, 2009. "Varieties of export-oriented entrepreneurship in Asia," Asia Pacific Journal of Management, Springer, vol. 26(3), pages 537-561, September.
    24. Philipp Koellinger, 2008. "Why are some entrepreneurs more innovative than others?," Small Business Economics, Springer, vol. 31(1), pages 21-37, June.
    25. Michael D. Giandrea & Kevin E. Cahill & Joseph F. Quinn, 2008. "Self-Employment Transitions among Older American Workers with Career Jobs," Boston College Working Papers in Economics 684, Boston College Department of Economics.
    26. Lois Stevenson & Anders Lundström, 2007. "Dressing the Emperor: The Fabric of Entrepreneurship Policy," Chapters, in: David B. Audretsch & Isabel Grilo & A. Roy Thurik (ed.), Handbook of Research on Entrepreneurship Policy, chapter 6, Edward Elgar Publishing.
    27. Baum, J. Robert & Olian, Judy D. & Erez, Miriam & Schnell, Eugene R. & Smith, Ken G. & Sims, Henry P. & Scully, Judith S. & Smith, Ken A., 1993. "Nationality and work role interactions: A cultural contrast of Israeli and U.S. entrepreneurs' versus managers' needs," Journal of Business Venturing, Elsevier, vol. 8(6), pages 499-512, November.
    28. Acs,Zoltan J. & Audretsch,David B. (ed.), 1993. "Small Firms and Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521431156.
    29. Sander Wennekers, 2006. "Entrepreneurship at Country Level : Economic and Non-Economic Determinants," Scales Research Reports R200602, EIM Business and Policy Research.
    30. Etzioni, Amitai, 1987. "Entrepreneurship, adaptation and legitimation : A macro-behavioral perspective," Journal of Economic Behavior & Organization, Elsevier, vol. 8(2), pages 175-189, June.
    31. 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 457-488, April.
    32. Kenneth L. Sokoloff, 1984. "Was the Transition from the Artisanal Shop to the Factory Associated with Gains in Efficiency?: Evidence from the U.S. Manufacturing Censuses of 1820 and 1850," UCLA Economics Working Papers 300, UCLA Department of Economics.
    33. Ulrike Muehlberger & Silvia Pasqua, 2006. "The “Continuous Collaborators” in Italy. Hybrids between Employment and Self-employment?," CHILD Working Papers wp10_06, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    34. Schaffner, Julie Anderson, 1993. "Rising incomes and the shift from self-employment to firm-based production," Economics Letters, Elsevier, vol. 41(4), pages 435-440.
    35. Zoltan Acs, 2006. "How Is Entrepreneurship Good for Economic Growth?," Innovations: Technology, Governance, Globalization, MIT Press, vol. 1(1), pages 97-107, March.
    36. Laura Abramovsky & Rachel Griffith, 2006. "Outsourcing and Offshoring of Business Services: How Important is ICT?," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 594-601, 04-05.
    37. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
    38. Audretsch, David & Braunerhjelm, Pontus & Acs, Zoltán J & Carlsson, Bo, 2004. "The Missing Link: The Knowledge Filter and Entrepreneurship in Endogenous Growth," CEPR Discussion Papers 4783, C.E.P.R. Discussion Papers.
    39. Syrquin, Moshe, 1988. "Patterns of structural change," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 7, pages 203-273, Elsevier.
    40. Boyan Jovanovic, 1993. "The Diversification of Production," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1 Microec), pages 197-247.
    41. Carree, Martin A. & Nijkamp, Joyce, 2001. "Deregulation in retailing: the Dutch experience," Journal of Economics and Business, Elsevier, vol. 53(2-3), pages 225-235.
    42. Niels Noorderhaven & Roy Thurik & Sander Wennekers & André van Stel, 2004. "The Role of Dissatisfaction and per Capita Income in Explaining Self–Employment across 15 European Countries," Entrepreneurship Theory and Practice, , vol. 28(5), pages 447-466, September.
    43. Sander Wennekers & Mickey Folkeringa, 2002. "The development of self-employment rate in the Netherlands 1899-1997," Scales Research Reports N200221, EIM Business and Policy Research.
    44. 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.
    45. Prusa, Thomas J. & Schmitz, James Jr., 1991. "Are new firms an important source of innovation? : Evidence from the PC software industry," Economics Letters, Elsevier, vol. 35(3), pages 339-342, March.
    46. Sokoloff, Kenneth L., 1984. "Was the transition from the artisanal shop to the nonmechanized factory associated with gains in efficiency?: Evidence from the U.S. Manufacturing censuses of 1820 and 1850," Explorations in Economic History, Elsevier, vol. 21(4), pages 351-382, October.
    47. Fernando Merino & Diego Rodríguez Rodríguez, 2007. "Business services outsourcing by manufacturing firms," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(6), pages 1147-1173, December.
    48. Chandler, Alfred D., 1990. "Scale and Scope: A Review Colloquium - Scale and Scope: The Dynamics of Industrial Capitalism. By Alfred D. ChandlerJr., with Takashi Hikino · Cambridge, Mass.: Harvard University Press, 1990. xix + ," Business History Review, Cambridge University Press, vol. 64(4), pages 690-735, January.
    49. Jackson, Laurence Fraser, 1984. "Hierarchic Demand and the Engel Curve for Variety," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 8-15, February.
    50. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sander Wennekers & Roy Thurik & André Stel & Niels Noorderhaven, 2010. "Uncertainty Avoidance and the Rate of Business Ownership Across 21 OECD Countries, 1976–2004," Springer Books, in: Andreas Freytag & Roy Thurik (ed.), Entrepreneurship and Culture, chapter 0, pages 271-299, Springer.
    2. Sander Wennekers & Roy Thurik & André van Stel & Niels Noorderhaven, 2003. "Uncertainty Avoidance and the Rate of Business Ownership across 22 OECD Countries, 1976-2000," Tinbergen Institute Discussion Papers 03-089/3, Tinbergen Institute, revised 01 Sep 2004.
    3. Roy Thurik & Sander Wennekers & Ingrid Verheul & David Audretsch, 2001. "An eclectic theory of entrepreneurship: policies, institutions and culture," Scales Research Reports H200012, EIM Business and Policy Research.
    4. Martin Carree & André van Stel & Roy Thurik & Sander Wennekers, 2000. "Business Ownership and Economic Growth in 23 OECD Countries," Tinbergen Institute Discussion Papers 00-001/3, Tinbergen Institute.
    5. Peter van der Zwan & Ingrid Verheul & Roy Thurik & Isabel Grilo, 2009. "Entrepreneurial Progress: Climbing the Entrepreneurial Ladder in Europe and the US," Tinbergen Institute Discussion Papers 09-070/3, Tinbergen Institute, revised 17 Mar 2010.
    6. D.B. Audretsch & A.R. Thurik, 2010. "Unraveling the Shift to the Entrepreneurial Economy," Tinbergen Institute Discussion Papers 10-080/3, Tinbergen Institute, revised 02 Apr 2011.
    7. Sander Wennekers & André Stel & Roy Thurik & Paul Reynolds, 2008. "Nascent entrepreneurship and the level of economic development," Small Business Economics, Springer, vol. 30(3), pages 325-325, March.
    8. Lorraine Uhlaner & Roy Thurik, 2010. "Postmaterialism Influencing Total Entrepreneurial Activity Across Nations," Springer Books, in: Andreas Freytag & Roy Thurik (ed.), Entrepreneurship and Culture, chapter 0, pages 301-328, Springer.
    9. Roy Thurik, 2014. "Entrepreneurship and the business cycle," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-90, October.
    10. Joern Block & Roy Thurik & Haibo Zhou, 2013. "What turns knowledge into innovative products? The role of entrepreneurship and knowledge spillovers," Journal of Evolutionary Economics, Springer, vol. 23(4), pages 693-718, September.
    11. Jolanda Hessels & Marco Gelderen & Roy Thurik, 2008. "Entrepreneurial aspirations, motivations, and their drivers," Small Business Economics, Springer, vol. 31(3), pages 323-339, October.
    12. Giuliano Guerra & Roberto Patuelli, 2016. "The Role of Job Satisfaction in Transitions into Self–Employment," Entrepreneurship Theory and Practice, , vol. 40(3), pages 543-571, May.
    13. Hugo Erken & Piet Donselaar & Roy Thurik, 2018. "Total factor productivity and the role of entrepreneurship," The Journal of Technology Transfer, Springer, vol. 43(6), pages 1493-1521, December.
    14. Martin Carree & André van Stel & Roy Thurik & Sander Wennekers, 2007. "The Relation between Economic Development and Business Ownership revisited," Tinbergen Institute Discussion Papers 07-022/3, Tinbergen Institute.
    15. Luis Medrano-Adán & Vicente Salas-Fumás & J. Sanchez-Asin, 2015. "Heterogeneous entrepreneurs from occupational choices in economies with minimum wages," Small Business Economics, Springer, vol. 44(3), pages 597-619, March.
    16. Roy Thurik & Marcus Dejardin, 2012. "Entrepreneurship and Culture," Post-Print halshs-00943684, HAL.
    17. Ingrid Verheul & André Van Stel & Roy Thurik, 2006. "Explaining female and male entrepreneurship at the country level," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 18(2), pages 151-183, March.
    18. Grilo, I. & Thurik, A.R., 2004. "Determinants Of Entrepreneurship In Europe," ERIM Report Series Research in Management ERS-2004-106-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.
    19. Rafik Abdesselam & Jean Bonnet & Patricia Renou-Maissant & Mathilde Aubry, 2018. "Entrepreneurship, economic development, and institutional environment: evidence from OECD countries," Journal of International Entrepreneurship, Springer, vol. 16(4), pages 504-546, December.
    20. Thai, Mai Thi Thanh & Turkina, Ekaterina, 2014. "Macro-level determinants of formal entrepreneurship versus informal entrepreneurship," Journal of Business Venturing, Elsevier, vol. 29(4), pages 490-510.

    More about this item

    Keywords

    Entrepreneurship; Self-employment; Business ownership; Business start-ups; Economic development; U-shape; L-shape; Entrepreneurship; Public policy; Labor economics;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:now:fntent:0300000023. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lucy Wiseman (email available below). General contact details of provider: http://www.nowpublishers.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.