Showing papers by "Roy Thurik published in 2003"

The Impact of Entrepreneurship on Economic Growth

Abstract: The present chapter deals with the consequences of entrepreneurship for macro-economic growth. It consists of eight sections: (1) Introduction; (2) The influence of economic development on entrepreneurship; (3) Types of entrepreneurship and their relation to economic growth; (4) The effects of the choice between entrepreneurship and employment; (5) Entrepreneurship in endogenous growth models; (6) Strands of empirical evidence; (7) The time lag structure; and (8) Conclusion.

Entrepreneurship and Unemployment in the UK

Abstract: The influence of industrial structure, more specifically of entrepreneurship, is investigated on the level of unemployment in the UK. The question is to what extent entrepreneurship, i.e., business ownership can reduce the level of unemployment. The alleged differences between the managed and the entrepreneurial economy will be discussed as well as the links between entrepreneurship and unemployment. It will be concluded that the UK is a relative outlier when using a simple model of the relationship between unemployment and the rate of business ownership. The model is calibrated using recent data of some 23 OECD countries. It underestimates the decrease in unemployment in the UK in the period 1982–1990. Some arguments are brought forward why this might be the case.

Uncertainty Avoidance and the Rate of Business Ownership across 22 OECD Countries, 1976-2000

Abstract: This paper deals with the influence of cultural attitudes towards uncertainty on the level of businessownership across countries. First, the concepts of uncertainty and risk are elaborated, as well as theirrelevance for entrepreneurship. Second, cross-sectional regression analysis using data for three separateyears in twenty Western countries and Japan and controlling for GDP per capita, yields evidence thatuncertainty avoidance is positively correlated with the prevalence of business ownership. This surprisingfinding suggests that a personal trait (risk aversion) and its related cultural characteristic (uncertaintyavoidance) may have a diverging impact on entrepreneurship. Possibly, a climate of uncertainty avoidancein large organizations pushes enterprising individuals towards self-employment. Third, we carry out pooledpanel regressions with respect to business ownership rates in two distinct cultural country clusters for theyears 1976, 1988 and 2000. In the group of high-uncertainty avoidance countries a strongly negativerelationship between GDP per capita and the level of business ownership is found, suggesting that risingopportunity costs of entrepreneurship are the dominant perception in this cultural environment. In a groupof low-uncertainty avoidance countries no such influence of per capita income is found, but the profitsassociated with being self-employed are positively associated with business ownership.

Gibrat's Law and the Firm Size / Firm Growth Relationship in Italian Services

Abstract: textSeveral surveys on intra-industry dynamics have recently reached the conclusion from a large body of evidence that Gibrat's Law does not hold, i.e., the main finding is that firm growth decreases with firm size. However, almost all of these studies have been based on manufacturing. In this paper - in search of further evidence supporting the results recently obtained for a large sample of Dutch firms in the hospitality industry - we examine whether the assumption that growth rates are independent of firm size can be rejected for the services, as it has been for manufacturing, also in the case of Italy. Based on a large sample of Italian new-born firms in five business groups in the hospitality industry, the evidence suggests that growth rates are, in fact, independent of firm size in two business groups, while Gibrat's Law is rejected for the remaining three business groups and for the industry as a whole. These mixed results concerning Gibrat's Law in the services are consistent with the hypothesis that the dynamics of industrial organisation for services may not simply mirror that for manufacturing. Besides, the findings in this paper support the hypothesis that any general conclusion concerning Gibrat's Law cannot be reached without considering heterogeneity, at least among firms of different industries.

Success and Risk Factors in the Pre-Startup Phase

Abstract: This resesarch evaluates the relative importance ofseveral categories of variables in explaining startup success. A sample of 517 nascent Dutch entrepreneurs was identified in 1998 (from data collected by the Entrepreneurial Research Consortium), and tracked for three years. W.B. Gartner's framework for new venture creation was used. Thisperspective identified four ways in which startup efforts differ: the individual's characteristics, organization created, environment surrounding the venture, and process of the new venture. Variables analyzed include ambition (high and low), experience (substantial and limited), perceived risk, time investment, exposure to guidance and advice agencies, age, creation of business plan, capital requirements, and type of business. It was found that few personal characteristics of nascent entrepreneurs are associated with startup success. Startup capital, market risk, starting a manufacturing firm, and starting full-time are important factors. Also indicated was that older people with limited ambition are less likely to be successful. For nascent entrepreneurs with limited ambition, a business planworks positively but negatively for those with high ambition. Extensive experience does little to predict success. However, use of information and guidance increases the chance of success among less experienced entrepreneurs. Part-time businesses were also found to be easier to start. (TNM)

Gibrat's Law and the firm size/firm growth relationship in italian small scale services(*)

Abstract: Plusieurs enquetes sur les dynamiques internes des industries ont recemment permis d'en conclure que la loi de Gibrat ne tient pas. La decouverte la plus importante a revele que plus une entreprise grandit, plus son taux de croissance diminue. Dans ce document (a la recherche de preuves supplementaires confortant les resultats obtenus recemment sur un echantillon important de nouvelles entreprises hollandaises de petites dimensions du secteur de l'hebergement) nous examinons si l'hypothese selon laquelle les taux de croissance sont independants de la taille des entreprises peut etre rejetee pour les services, comme ce fut le cas pour les entreprises de fabrication manufacturiere, meme pour les nouvelles entreprises italiennes du secteur de l'hebergement. En effet, sur un echantillon de nouvelles entreprises selectionnees dans cinq groupes d'affaires differents, la loi de Gibrat est rejetee pour trois groupes et pour l'industrie dans son ensemble, alors qu'elle est confirmee pour les deux autres groupes. Par consequent, dans certains groupes d'affaires du secteur de l'hebergement les plus petites parmi les nouvelles entreprises doivent initialement fournir des efforts pousses pour atteindre une taille comparable a celle des entreprises concurrentes de dimensions plus importantes. Cependant, les entreprises dont le taux de croissance est tres rapide au cours des premieres annees d'activite connaissent ensuite un ralentissement de leur croissance lorsqu'elles atteignent une dimension assez importante pour accroitre leurs chances de survie.

Human Resource Management With Small Firms; Facts And Explanations

Abstract: This study examines determinants of the formalization of HRM practices with small firms. We derive five hypotheses that identify possible determinants of the level of formalization, including firm size, family business, the availability of an HRM department or HRM manager, and the existence of a formal business plan. We test these hypotheses using data on more than 700 Dutch small firms. We find that, within this sample of small firms, larger firms apply more formalized HRM practices than smaller firms do. However, once we take certain contextual variables into account, the direct relation with firm size becomes substantially less. Indirect relations with firm size also exist: firm size is a determinant of the probability that an HRM department is present, which in turn is related to the formalization of all HRM scales. Finally, family businesses apply less formal HRM practices, as do businesses without a business plan.

Explaining nascent entrepreneurship across countries

Abstract: textThis paper aims at explaining cross-country variation in nascent entrepreneurship. Regression analysis is applied using various explanatory variables derived from three different approaches. We make use of the Global Entrepreneurship Monitor database, including nascent entrepreneurship rates for 36 countries in 2002 as well as variables from standardized national statistics. The first approach relates the level of entrepreneurship of a country to its level of economic development. We find evidence for a U-shaped relationship. The second approach deals with a regime switch where the innovative advantage moves from large, established enterprises to small and new firms, because new technologies have reduced the importance of scale economies in many sectors. The third approach assumes that nascent entrepreneurship depends upon aggregate conditions such as technology, demography, culture and institutions, influencing opportunities, resources, skills and preferences. Several indicators of these aggregate conditions are found to correlate with nascent entrepreneurship. A full model combining the three approaches includes a U-shaped relationship with per capita income as well as with Porter’s innovative capacity index in addition to effects of social security expenditure (-) and the total business ownership rate (+). Finally, a (former) communist-country dummy plays an important role.

Self-employment across 15 european countries: the role of dis- satisfaction

Abstract: This paper deals with differences in the rate of self-employment (business ownership) in 15 European countries for the period 1978-2000, focusing on the influence of dissatisfaction and using the framework of occupational choice. Using two different measures of dissatisfaction, in addition to the level of economic development, the unemployment rate and income differentials, we find that dissatisfaction at the level of societies is the most significant factor for explaining differences in self-employment levels. Dissatisfaction with life and with the way democracy works are both found to be positively related to self-employment. It is concluded that these are proxies for job dissatisfaction and at the same time represent other negative 'displacements' known to promote self-employment.

Entrepreneurship, industry evolution and economic growth

Abstract: The purpose of this paper is to provide a link between entrepreneurial activity on the one hand, and industry evolution and economic growth on the other. The role that entrepreneurship plays in innovative activity is explained. The link between entrepreneurship and industry evolution through the spillover of knowledge in generating entrepreneurial activity is analyzed. This implies that the relationship between entrepreneurship and growth is identified. In particular, this paper finds that entrepreneurship generates a positive pulse in the evolution of industries in such a way that fosters economic growth.

Explaining nascent entrepreneurship across countries

Abstract: This paper aims at explaining cross-country variation in nascent entrepreneurship. Regression analysis is applied using various explanatory variables derived from three different approaches. We make use of the Global Entrepreneurship Monitor database, including nascent entrepreneurship rates for 36 countries in 2002 as well as variables from standardized national statistics. The first approach relates the level of entrepreneurship of a country to its level of economic development. We found evidence for a U-shaped relationship. The second approach deals with a regime switch where the innovative advantage moves from large, established enterprises to small and new firms, because new technologies have reduced the importance of scale economies in many sectors. The third approach assumes that nascent entrepreneurship depends upon aggregate conditions such as technology, demography, culture and institutions, influencing opportunities, resources, skills and preferences. Several indicators of these aggregate conditions are found to correlate with nascent entrepreneurship. A full model combining the three approaches includes a U-shaped relationship with per capita income as well as with Porter's innovative capacity index, in addition to effects of social security expenditure (-) and the total business ownership rate (+). Finally, a (former) communist-country dummy plays an important role.

Self-employment across 15 European countries: the role of dissatisfaction

Abstract: This paper deals with differences in the rate of self-employment (business ownership) in 15 European countries for the period 1978-2000, focusing on the influence of dissatisfaction and using the framework of occupational choice. Using two different measures of dissatisfaction, in addition to the level of economic development, the unemployment rate and income differentials, we find that dissatisfaction at the level of societies is the most significant factor for explaining differences in self-employment levels. Dissatisfaction with life and with the way democracy works are both found to be positively related to self-employment. It is concluded that these are proxies for job dissatisfaction and at the same time represent other negative 'displacements' known to promote self-employment.

Human Resource Management With Small Firms; Facts And Explanations

Abstract: This study examines determinants of the formalization of HRM practices with small firms. We derive five hypotheses that identify possible determinants of the level of formalization, including firm size, family business, the availability of an HRM department or HRM manager, and the existence of a formal business plan. We test these hypotheses using data on more than 700 Dutch small firms. We find that, within this sample of small firms, larger firms apply more formalized HRM practices than smaller firms do. However, once we take certain contextual variables into account, the direct relation with firm size becomes substantially less. Indirect relations with firm size also exist: firm size is a determinant of the probability that an HRM department is present, which in turn is related to the formalization of all HRM scales. Finally, family businesses apply less formal HRM practices, as do businesses without a business plan.

Explaining the entrepreneurial activity rate of women: a macro-level perspective

Abstract: textThe present study aims at explaining female entrepreneurship from a country perspective. Explanatory variables are derived from three streams of literature, including the literature on the determinants of entrepreneurship in general, on female labor force participation, and on female entrepreneurship. To test hypotheses we make use of Global Entrepreneurship Monitor data, including total entrepreneurial activity rates (nascent entrepreneurs and owner/managers of new firms) for both women and men for 2002, as well as a range of other (economic, demographic, institutional and cultural) variables from standardized national statistics. We find that the factors determining female and male entrepreneurship at the macro-level are fairly similar.

Self-Employment Across 15 European Countries:

Abstract: textThis paper deals with differences in the rate of self-employment (business ownership) in 15 European countries for the period 1978-2000, focusing on the influence of dissatisfaction and using the framework of occupational choice. Using two different measures of dissatisfaction, in addition to the level of economic development, the unemployment rate and income differentials, we find that dissatisfaction at the level of societies is the most significant factor for explaining differences in self-employment levels. Dissatisfaction with life and with the way democracy works are both found to be positively related to self-employment. It is concluded that these are proxies for job dissatisfaction and at the same time represent other negative ‘displacements’ known to promote self-employment.

Business accomplishments, gender and entrepreneurial self-image

Abstract: Drawing on Bem's psychological theory of self-perception, this paper presents and tests a model that examines the impact of business accomplishments and gender on entrepreneurial self-image and explores the definition of entrepreneurship according to Vesper's Entrepreneurial Typology.

The effect of entrepreneurship on national economic growth: an empirical analysis using the GEM data base

Abstract: textThe increased importance of knowledge as a source of competitiveness for modern economies suggests that the organization of industries most conducive to innovative activity and unrestrained competition will be linked to higher growth rates. Entrepreneurial activity is generally assumed to be an important aspect of this organization. In the present paper we investigate whether a new and promising concept, Total Entrepreneurial Activity, influences GDP growth for 36 countries in a recent period. We will also test whether this influence depends upon the level of economic development measured as GDP per capita. With this test we aim to investigate to what extent the role of entrepreneurship has changed in the last decades of the 20th century. Although the limited number of observations does not allow for many competing explanatory variables, we will examine the role of the so-called Growth Competitiveness Index. This variable captures a range of alternative explanations for achieving sustained economic growth. In addition, we incorporate the initial level of economic development to correct for convergence. We find that entrepreneurial activity indeed affects economic growth, but that this effect depends upon the level of per capita income. This suggests that entrepreneurship plays a different role in countries in different stages of economic development.

Success and risk factors in the pre-startup phase

Abstract: Why does one person actually succeed in starting a business, while a second person gives up? In order to answer this question, a sample of 517 nascent entrepreneurs (people in the process of setting up a business) was followed over a three-year period. After this period, it was established that 195 efforts were successful and that 115 startup efforts were abandoned. Our research focuses on estimating the relative importance of a variety of approaches and variables in explaining pre-startup success. These influences are organised in terms of Gartner's framework of new venture creation. This framework suggests that start-up efforts differ in terms of the characteristics of the individual(s) who start the venture, the organisation which they create, the environment surrounding the new venture, and the process by which the new venture is started. Logistic regression analyses are run for the sample as a whole as well as for subgroups within the sample, namely for those with high ambition vs. low ambition and for those with substantial vs. limited experience. The results point to the importance of perceived risk of the market as a predictor of getting started vs. abandoning the startup effort.