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The Relation between Economic Development and Business Ownership revisited

Author

Listed:
  • Martin Carree

    (University of Maastricht)

  • André van Stel

    () (EIM, Zoetermeer, Cranfield University School of Management, and Erasmus Universiteit Rotterdam)

  • Roy Thurik

    () (Erasmus School of Economics, Erasmus Universiteit Rotterdam; EIM, Zoetermeer, Cranfield University School of Management, and Max Planck Institute of Economics, Jena, Germany)

  • Sander Wennekers

    (EIM, Zoetermeer, and Erasmus Universiteit Rotterdam)

Abstract

This paper revisits the two-equation model of Carree, van Stel, Thurik and Wennekers (2002) where deviations from the ‘equilibrium’ rate of business ownership play a central role determining both the growth of business ownership and that of economic development. Two extensions of the original setup are addressed: using longer time series of averaged data of 23 OECD countries (up to 2004) we can discriminate between different functional forms of the ‘equilibrium’ rate and we allow for different penalties for being above or under the ‘equilibrium’ rate. The additional data do not provide evidence of a superior statistical fit of a U-shaped ‘equilibrium’ relationship when compared to an L-shaped one. There appears to be a growth penalty for having too few business owners but not so for having too many.

Suggested Citation

  • 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.
  • Handle: RePEc:tin:wpaper:20070022
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    References listed on IDEAS

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    1. Andreas Freytag & Roy Thurik, 2007. "Entrepreneurship and its determinants in a cross-country setting," Journal of Evolutionary Economics, Springer, vol. 17(2), pages 117-131, April.
    2. 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.
    3. Teece, David J, 1993. "The Dynamics of Industrial Capitalism: Perspectives on Alfred Chandler's Scale and Scope," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 199-225, March.
    4. 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.
    5. Nobuyuki Harada, 2005. "Potential Entrepreneurship in Japan," Small Business Economics, Springer, vol. 25(3), pages 293-304, October.
    6. Audretsch, David B, et al, 2002. "Impeded Industrial Restructuring: The Growth Penalty," Kyklos, Wiley Blackwell, vol. 55(1), pages 81-97.
    7. Thurik, A. Roy & Carree, Martin A. & van Stel, André & Audretsch, David B., 2008. "Does self-employment reduce unemployment?," Journal of Business Venturing, Elsevier, vol. 23(6), pages 673-686, November.
    8. 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.
    9. Magnus Henrekson, 2005. "Entrepreneurship: a weak link in the welfare state?," Industrial and Corporate Change, Oxford University Press, vol. 14(3), pages 437-467, June.
    10. Iyigun, Murat F & Owen, Ann L, 1998. "Risk, Entrepreneurship, and Human-Capital Accumulation," American Economic Review, American Economic Association, vol. 88(2), pages 454-457, May.
    11. Sander Wennekers & Roy Thurik & André Stel & Niels Noorderhaven, 2007. "Uncertainty avoidance and the rate of business ownership across 21 OECD countries, 1976–2004," Journal of Evolutionary Economics, Springer, vol. 17(2), pages 133-160, April.
    12. 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.
    13. Andre van Stel, "undated". "COMPENDIA: Harmonizing business ownership data across countries and over time," Papers on Entrepreneurship, Growth and Public Policy 2005-05, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    14. Carree, Martin A. & Potjes, Jeroen C. A. & Thurik, A. Roy, 1993. "Small store presence in Japan," Economics Letters, Elsevier, vol. 41(3), pages 329-334.
    15. Isabel Grilo & Jesus-Maria Irigoyen, 2006. "Entrepreneurship in the EU: To Wish and not to be," Small Business Economics, Springer, vol. 26(4), pages 305-318, May.
    16. Sander Wennekers, 2006. "Entrepreneurship at Country Level : Economic and Non-Economic Determinants," Scales Research Reports R200602, EIM Business and Policy Research.
    17. 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.
    18. 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.
    19. Blau, David M, 1987. "A Time-Series Analysis of Self-employment in the United State," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 445-467, June.
    20. 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.
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    Citations

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    Cited by:

    1. 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.
    2. Thurik, A. Roy & Carree, Martin A. & van Stel, André & Audretsch, David B., 2008. "Does self-employment reduce unemployment?," Journal of Business Venturing, Elsevier, vol. 23(6), pages 673-686, November.
    3. Urbano, David & Aparicio, Sebastian, 2016. "Entrepreneurship capital types and economic growth: International evidence," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 34-44.
    4. Farzana Chowdhury & Siri Terjesen & David Audretsch, 2015. "Varieties of entrepreneurship: institutional drivers across entrepreneurial activity and country," European Journal of Law and Economics, Springer, vol. 40(1), pages 121-148, August.
    5. Jean Bonnet, 2016. "From Knowledge to Innovation Economy: Developing Education and Creating Entrepreneurial Ecosystems," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2016-02, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    6. repec:eee:tefoso:v:123:y:2017:i:c:p:271-282 is not listed on IDEAS
    7. Hugo Erken & Piet Donselaar & Roy Thurik, 0000. "Total Factor Productivity and the Role of Entrepreneurship," Tinbergen Institute Discussion Papers 09-034/3, Tinbergen Institute.
    8. Martin Carree & Emilio Congregado & Antonio Golpe & André van Stel, 2015. "Self-employment and job generation in metropolitan areas, 1969-2009," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 27(3-4), pages 181-201, April.
    9. David Urbano & Sebastian Aparicio & Victor Querol, 2016. "Social progress orientation and innovative entrepreneurship: an international analysis," Journal of Evolutionary Economics, Springer, vol. 26(5), pages 1033-1066, December.
    10. Philipp Koellinger & Christian Roessler, 2009. "Is More Entrepreneurship better?," Tinbergen Institute Discussion Papers 09-105/3, Tinbergen Institute, revised 03 Dec 2009.
    11. José Ernesto Amorós Espinosa & Luciano Ciravegna & Vesna Mandakovic & Pekka Stenmolm, 2017. "Necessity or opportunity? the effects of State fragility and economic development on entrepreneurial efforts," Serie Working Papers 42, Universidad del Desarrollo, School of Business and Economics.
    12. Prieger, James E. & Bampoky, Catherine & Blanco, Luisa R. & Liu, Aolong, 2016. "Economic Growth and the Optimal Level of Entrepreneurship," World Development, Elsevier, vol. 82(C), pages 95-109.
    13. Aparicio, Sebastian & Urbano, David & Audretsch, David, 2016. "Institutional factors, opportunity entrepreneurship and economic growth: Panel data evidence," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 45-61.
    14. David, Audretsch & Donald, Kuratko & Albert, Link, 2015. "Making Sense of the Elusive Paradigm of Entrepreneurship," UNCG Economics Working Papers 15-4, University of North Carolina at Greensboro, Department of Economics.
    15. Kameliia Petrova, 2016. "Entrepreneurship And The Informal Economy: An Empirical Analysis," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 21(02), pages 1-21, June.
    16. Halicioglu, Ferda & Yolac, Sema, 2015. "Testing the impact of unemployment on self-employment: empirical evidence from OECD countries," MPRA Paper 65026, University Library of Munich, Germany.
    17. Elisabet Ferri & David Urbano, 2010. "Environmental Factors and Social Entrepreneurship," Working Papers 1003, Departament Empresa, Universitat Autònoma de Barcelona, revised Sep 2010.
    18. Semiha Turgut & Aliye Ahu Akgun, 2015. "The Causality Between Entrepreneurial Activities and Regional Economic Growth: Case of Turkey," ERSA conference papers ersa15p1093, European Regional Science Association.
    19. repec:wsi:ijitmx:v:14:y:2017:i:05:n:s0219877017500250 is not listed on IDEAS
    20. repec:rfe:zbefri:v:36:y:2018:i:1:p:129-153 is not listed on IDEAS
    21. Pokrovsky, D. & Shapoval, A., 2015. "Distribution of Entrepreneurial Skills and Migration: Employment Structure, Income Inequality, and Welfare," Journal of the New Economic Association, New Economic Association, vol. 26(2), pages 36-62.

    More about this item

    Keywords

    entrepreneurship; economic development; economic growth; business ownership;

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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