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Nascent entrepreneurship and the level of economic development

  • Sander Wennekers
  • André van Stel

    ()

  • Roy Thurik

    ()

  • Paul Reynolds

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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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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  1. Frederic Delmar & Per Davidsson, 2000. "Where do they come from? Prevalence and characteristics of nascent entrepreneurs," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 12(1), pages 1-23, January.
  2. 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.
  3. Schultz, T. Paul, 1989. "Women's changing participation in the labor force : a world perspective," Policy Research Working Paper Series 272, The World Bank.
  4. 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.).
  5. Bleaney, Michael & Nishiyama, Akira, 2002. " Explaining Growth: A Contest between Models," Journal of Economic Growth, Springer, vol. 7(1), pages 43-56, March.
  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.
  7. Blanchflower, David G., 2000. "Self-employment in OECD countries," Labour Economics, Elsevier, vol. 7(5), pages 471-505, September.
  8. 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.
  9. Sam Youl Lee & Richard Florida & Zoltan Acs, 2004. "Creativity and Entrepreneurship: A Regional Analysis of New Firm Formation," Regional Studies, Taylor & Francis Journals, vol. 38(8), pages 879-891.
  10. 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.
  11. 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.
  12. 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.
  13. Roy Thurik & Sander Wennekers & Lorraine Uhlaner, 2002. "Entrepreneurship and economic performance: a macro perspective," Scales Research Reports N200220, EIM Business and Policy Research.
  14. Heleen Stigter & Niels Bosma & Sander Wennekers, 2002. "The Long Road to the Entrepreneurial Society," Scales Research Reports A200115, EIM Business and Policy Research.
  15. Sander Wennekers, 2006. "Entrepreneurship at Country Level : Economic and Non-Economic Determinants," Scales Research Reports R200602, EIM Business and Policy Research.
  16. Ilmakunnas, P. & Kanniainen, V. & Lammi, U., 1999. "Entrepreneurship, Economic Risks, and Risk-Insurance in the Welfare State," University of Helsinki, Department of Economics 453, Department of Economics.
  17. 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.
  18. Catherine Armington & Zoltan Acs, 2002. "The Determinants of Regional Variation in New Firm Formation," Regional Studies, Taylor & Francis Journals, vol. 36(1), pages 33-45.
  19. 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.
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