http://repub.eur.nl/res/aut/557/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/20746/ 2010-09-01T00:00:00Z A recent literature has emerged providing compelling evidence that a major shift in the organization of the developed economies has been taking place: away from what has been characterized as the managed economy towards the entrepreneurial economy. In particular, the empirical evidence provides consistent support that (1) the role of entrepreneurship has significantly increased, and (2) a positive relationship exists between entrepreneurial activity and economic performance. However, the factors underlying this observed shift have not been identified in a systematic manner. The purpose of this paper is to suggest some of the factors leading to this shift and implications for public policy. In particular, we find that a fundamental catalyst underlying the shift from the managed to the entrepreneurial economy involved the role of technological change. However, we also find that it was not just technological change but rather involved a number of supporting factors, ranging from the demise of the communist system, increased globalization, new competition for multinational firms and higher levels of prosperity. Recognition of the causes of the shift from the managed to the entrepreneurial economy suggests a rethinking of the public policy approach. Rather than the focus of directly and exclusively on promoting startups and SMEs, it may be that the current approach to entrepreneurship policy is misguided. The priority should not be on entrepreneurship policy but rather a more pervasive and encompassing approach, policy consistent with an entrepreneurial economy. http://repub.eur.nl/res/pub/13650/ 2008-11-01T00:00:00Z This paper investigates the dynamic relationship between self-employment and unemployment rates. On the one hand, high unemployment rates may lead to start-up activity of self-employed individuals (the “refugee” effect). On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods (the “entrepreneurial” effect). This paper introduces a new two-equation vector autoregression model capable of reconciling these ambiguities and estimates it for data from 23 OECD countries between 1974 and 2002. The empirical results confirm the existence of two distinct relationships between unemployment and self-employment: the “refugee” and “entrepreneurial” effects. We also find that the “entrepreneurial” effects are considerably stronger than the “refugee” effects. http://repub.eur.nl/res/pub/7640/ 2006-03-29T00:00:00Z Why should individuals that have exited their firm consider re-entering into entrepreneurship, i.e. become renascent entrepreneurs? According to the logic of economic models of firm dynamics there is no reason to re-enter into entrepreneurship following termination of a previous firm. In contrast, research on nascent entrepreneurship has shown the positive effect of entrepreneurial experience on planning a new firm start. Based on the empirical evidence from a database consisting of ex-entrepreneurs, this study shows that renascent entrepreneurship is a pervasive phenomenon in current society. Especially entrepreneurial human and social capital induce renascent entrepreneurship. In addition, the nature of the firm exit also affects the probability of renascent entrepreneurship. http://repub.eur.nl/res/pub/9822/ 2005-01-01T00:00:00Z This paper investigates the dynamic interrelationship between self-employment and unemployment rates. On the one hand, unemployment rates may stimulate start-up activity of self-employed. On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods. These two effects have resulted in considerable ambiguities about the interrelationship between unemployment and entrepreneurial activity. This paper introduces a two equation vector autoregression model capable of reconciling these ambiguities and tests it for data of 23 OECD countries over the period 1974-2002. The empirical results confirm the two distinct relationships between unemployment and self-employment, i.e. ‘refugee’ and ‘entrepreneurial’ effects. We also find that the ‘entrepreneurial’ effects are considerably stronger than the ‘refugee’ effects. http://repub.eur.nl/res/pub/15823/ 2004-08-01T00:00:00Z The purpose of this article is to show how institutional and evolutionary economics provide better insights as to why some firms survive and others do not than does neoclassical economics. At the heart of the evolutionary theory is the view that new firms are a manifestation of diversity and that their subsequent survival is shaped by the selection process. Despite immense institutional and historical differences across different economic systems such as those in North America, Japan and Europe, evolutionary economics explains the role that diversity, selection and learning plays in economic development. We use a Dutch data set and a model on who survives and who does not to explain this role. http://repub.eur.nl/res/pub/15820/ 2004-05-01T00:00:00Z Several noted surveys on intra-industry dynamics have reached the conclusion from a large body of evidence that Gibrat's Law does not hold. However, almost all of these studies have been based on manufacturing or large scale services such as banking and insurance industries. There are compelling reasons to doubt whether these findings hold for small scale services such as the hospitality industries. In this paper we examine whether the basic tenet underlying Gibrat's Law– that growth rates are independent of firm size – can be rejected for the services as it has been for manufacturing. Based on a large sample of Dutch firms in the hospitality industries the evidence suggests that in most cases growth rates are independent of firm size. Validation of Gibrat's Law in some sub-sectors of the small scale services suggests that the dynamics of industrial organization for services may not simply mirror that for manufacturing. The present paper includes a survey of nearly 60 empirical studies on firm growth rates. http://repub.eur.nl/res/pub/15821/ 2004-01-01T00:00:00Z The present paper deals with the distinction between the models of the managed and entrepreneurial economies. It explains why the model of the entrepreneurial economy may be a better frame of reference than the model of the managed economy in the contemporary, developed economies. This is done by contrasting the most fundamental elements of the managed economy model with those of the entrepreneurial economy model. Building upon Audretsch and Thurik (2000 and 2001), Audretsch, Thurik, Verheul and Wennekers (2002) and Thurik and Verheul (2003), fourteen dimensions are identified as the basis for comparing models of the entrepreneurial and the managed economy. http://repub.eur.nl/res/pub/9910/ 2004-01-01T00:00:00Z http://repub.eur.nl/res/pub/9916/ 2004-01-01T00:00:00Z Entrepreneurship and SMEs have emerged as the engine of economic and social development throughout the world. The role of entrepreneurship has changed dramatically and fundamentally, so that it is now seen as a requisite ingredient generating employment, economic growth and international competitiveness in the global economy. The purpose of this report is first to explain why the role of SMEs is crucial for international competitiveness and a strong economic performance in Europe, and then to document the role that SMEs play in Europe. Entrepreneurship and SMEs are related but certainly not identical concepts. Entrepreneurs, for example, are the main drivers of the firm creation process where young and small firms play a role. On the other hand, the entrepreneurial energy of a country, region or industry is often described using phenomena such as firm creation and turbulence (Carree and Thurik, 2003). The impact that SMEs have on economic performance in Europe is explained in Chapter 2. A careful measurement of the structure and role of SMEs is required to understand the different roles that SMEs play and how these roles are evolving throughout Europe. In particular, a measurement of SME activity in Europe provides (in Section 3.1) what the (static) role of SMEs is in Europe, how the role of SMEs varies across specific countries and how it is benchmarked against the other major areas in the world. How the economic role of SMEs has been changing over time is presented in Section 3.2. The way in which the measurement of the structure and role of SMEs is set up hinges on two views: first it attempts to illustrate the theory-based results surveyed in Chapter 2. Second, it is in line with the measurements given in earlier versions of the SME Observatory reports 'SMEs in Europe'. A report about SMEs in Europe would however not be complete if no attention is paid to the current economic setting. The European economy is recovering from an economic downturn. Very little information is available about the roles of SMEs in the business cycle and in particular how do SMEs respond to economic adversity. This issue is dealt with in Chapter 4. Finally a Synthesis is presented in Chapter 5. http://repub.eur.nl/res/pub/15870/ 2002-02-01T00:00:00Z This paper documents that a process of industrial restructuring has been transforming the developed economies, where large corporations are accounting for less economic activity and small firms are accounting for a greater share of economic activity. Not all countries, however, are experiencing the same shift in their industrial structures. Little is known about the cost of resisting this restructuring process. The goal of this paper is to identify whether there is a cost, measured in terms of forgone growth, of an impeded restructuring process. The cost is measured by linking growth rates of European countries to deviations from the 'optimal' industrial structure. The empirical evidence suggests that countries impeding the restructuring process pay a penalty in terms of forgone growth. http://repub.eur.nl/res/pub/153/ 2002-01-22T00:00:00Z Several noted surveys on intra-industry dynamics have recently reached the conclusion from a large body of evidence that Gibrat's Law does not hold. However, almost all of these studies have been based on manufacturing. There are compelling reasons to doubt whether these findings hold for the services. In this paper we examine whether the basic tenet underlying Gibrat's Law - that growth rates are independent of firm size - can be rejected for the services as it has been for manufacturing. Based on a large sample of Dutch firms the evidence suggests that growth rates are, in fact, independent of firm size. Validation of Gibrat's Law in the services suggests that the dynamics of industrial organisation for services may not simply mirror that for manufacturing. http://repub.eur.nl/res/pub/6857/ 2001-08-02T00:00:00Z The relationship between unemployment and entrepreneurship has been shrouded with ambiguity. There is assumed to be a two-way causation between changes in the level of entrepreneurship and that of unemployment-- a "Schumpeter" effect of entrepreneurship reducing unemployment and a "refugee" or "shopkeeper" effect of unemployment stimulating entrepreneurship. The purpose of this paper is to try to reconcile the ambiguities found in the relationship between unemployment and entrepreneurship. We do this by introducing a two equation model where changes in unemployment and in the number of business owners are linked to subsequent changes in those variables for a panel of 23 OECD countries over the period 1974-1998. The existence of two distinct and separate relationships between unemployment and entrepreneurship is identified including significant "Schumpeter" and "refugee" effects. http://repub.eur.nl/res/pub/15878/ 2001-04-01T00:00:00Z A recent literature analyzing the dynamics of firms and industries suggests that the contribution of new and small firms to the dynamics of competition is significantly greater than found in a static analysis. Policy makers have responded by implementing a wide range of programs to reduce barriers to new-firm startup. At the same time, a number of European countries have maintained systems of collective agreements imposing industry-wide standards on the deployment and remuneration of inputs, particularly labor. The purpose of this paper is to examine whether the ability to deviate from the industry standards practiced by the incumbent firms promotes the viability of small and new firms. We examine this using a longitudinal data base from the Netherlands, where a system of rigid industry-wide collective agreements was abandoned in favor of greater flexibility. Whether or not the ability of small firms to deviate from the standards and practices of the incumbent firms in the industry promotes their viability in the Dutch context is instructive to other European countries, such as Germany and France. The latter countries have identified the startup of new firms as a central policy goal, but have maintained systems of industry-wide collective agreements. The important finding emerging from this paper is that wage flexibility promotes the viability of small firms and thus can be considered to be an instrument of competition policy in a dynamic context http://repub.eur.nl/res/pub/6873/ 2001-03-14T00:00:00Z The level of entrepreneurship differs considerably across countries and periods. Both the causes and consequences of entrepreneurship are a matter of extensive scientific debate as well as of great policy importance. A high level of entrepreneurial activity is assumed and shown to contribute to innovative activities, competition, economic growth and job creation. The present paper deals with the determinants of entrepreneurship. An eclectic theory of entrepreneurship is introduced. This eclectic theory provides an integrated framework, drawing on disparate strands of literature, to create a better understanding of the different role that entrepreneurship plays in different countries and time periods. This framework is designed to guide future empirical research in this area and to provide insights for policymakers striving to promote entrepreneurship. http://repub.eur.nl/res/pub/15879/ 2001-03-01T00:00:00Z The purpose of this paper is to document the fundamental shift that is taking place in OECD countries. This shift is from the managed economy to the entrepreneurial economy. While politicians and policymakers have made a plea for guidance in the era of entrepreneurship, scholars have been slow to respond. This paper attempts to make a first step identifying and articulating these differences. We do this by contrasting the most fundamental elements of the newly emerging entrepreneurial economy with those of the managed economy. We identify 14 trade-offs confronting these two polar worlds. The common thread throughout these trade-offs is the increased role of new and small enterprises in the entrepreneurial economy. A particular emphasis is placed on changes in economic policy demanded by the entrepreneurial economy vis-à-vis the managed economy. http://repub.eur.nl/res/pub/9918/ 2001-01-01T00:00:00Z This paper provides a link between the degree of entrepreneurial activity in a country and the growth performance. While a recent wave of empirical evidence suggests that the extent to which countries have shifted towards an increased role of entrepreneurship varies considerably across countries, virtually nothing is known about the consequences of lagging behind in this process. Do countries that have shifted towards a greater role for entrepreneurship enjoy greater growth? This question is crucial to policy makers, because if the opportunity cost, measured in terms of forgone growth, of a slow adjustment towards a greater role for entrepreneurship is relatively low, the consequences of not engaging in a rapid adjustment process are relatively trivial. However, if the opportunity cost is high, the consequences are more alarming. This paper offers two distinct approaches, based on two different measures of entrepreneurship – the relative share of economic activity accounted for by small firms, and the selfemployment rate. In addition, two different measures of performance of economic activity are also analysed – economic growth and reduction of unemployment – to link changes in entrepreneurship to changes in economic performance. Different samples including OECD countries over different time periods reach consistent results – increases in entrepreneurial activity tends to result in higher subsequent growth rates and a reduction of unemployment. We are grateful to the suggestions of Thomas Andersson and the anonymous referees of the OECD on earlier drafts of this paper, as well as the contributions of our colleagues on various research projects and papers, Martin Carree and Andre van Stel. Some of the statistical results and analyses are taken from joint work with these co-authors. Any errors or omissions remain our responsibility. http://repub.eur.nl/res/pub/6930/ 2000-11-10T00:00:00Z This paper documents that a process of industrial restructuring has been transforming the developed economies, where large corporations are accounting for less economic activity and small firms are accounting for a greater share of economic activity. Not all countries, however, are experiencing the same shift in their industrial structures. Very little is known about the cost of resisting this restructuring process. The goal of this paper is to identify whether there is a cost, measured in terms of forgone growth, of an impeded restructuring process. The cost is measured by linking growth rates of European countries to deviations from the optimal industrial structure. The empirical evidence suggests that countries impeding the restructuring process pay a penalty in terms of forgone growth. http://repub.eur.nl/res/pub/51/ 2000-10-26T00:00:00Z The purpose of this paper is to document the fundamental shift that is taking place in OECD countries. This shift is from the managed economy to the entrepreneurial economy. While politicians and policy makers have made a plea for guidance in the era of entrepreneurship, scholars have been slow to respond. This paper attempts to make a first step identifying and articulating these differences. We do this by contrasting the most fundamental elements of the newly emerging entrepreneurial economy with those of the managed economy. We identify fourteen trade-offs confronting these two polar worlds. The common thread throughout these trade-offs is the increased role of new and small enterprises in the entrepreneurial economy. A particular emphasis is placed on changes in economic policy demanded by the entrepreneurial economy vis-?-vis the managed economy. http://repub.eur.nl/res/pub/15882/ 2000-02-01T00:00:00Z The purpose of this paper is to examine whether the dynamics of industrial organization differ in the Netherlands from what has emerged as a Stylized Fact in other countries. Because the Netherlands has pursued a unique set of institutions and policies comprising what has become known as the Polder Model, the factors leading to firm failure may systematically differ from those in other countries. We address this question using a longitudinal database from Statistics Netherlands (CBS) that identifies over two thousand firms in manufacturing and then tracks their performance over time. http://repub.eur.nl/res/pub/15881/ 2000-01-01T00:00:00Z This paper explains how and why the developed countries are undergoing a fundamental shift away from a managed economy and towards an entrepreneurial economy. This shift is shaping the development of western capitalism and has triggered a shift in government policies away from constraining the freedom of business to contract through regulation, public ownership and antitrust towards a new set of enabling policies which foster the creation and commercialization of new knowledge. The empirical evidence from a cross-section of countries over time suggests that those countries that have experienced a greater shift from the managed to the entrepreneurial economy have had lower levels of unemployment. http://repub.eur.nl/res/pub/7714/ 1999-09-09T00:00:00Z The purpose of this paper is to introduce a series of articles on the links between innovation, the evolution of industry and employment. These relations provide the building blocks of a new industrial policy. The articles are included in Innovation, Industry Evolution and Employment published by Cambridge University Press in 1999. The continued rising unemployment coupled with moderate growth in Europe has triggered a plea by policy makers for rethinking the policy approach that brought about European prosperity during the post-war era. The resulting policy debate has been cast in terms of an inevitable tradeoff between greater employment but at the sacrifice of lower wages on the one hand, versus the maintenance of wages and living standards but at the cost of less employment on the other. In terms of this debate, the Anglo-American solution has been the former, while the continental Europeans have chosen the latter. The purpose the thirteen articles of Innovation, Industry Evolution and Employment is to suggest that this policy debate has been miscast. There is an alternative. This alternative involves structural change, and in particular shifting economic activity out of traditional moderate-technology industries and into new emerging knowledge-based industries. In other words, it involves innovation, industry evolution and their consequences for employment development. To shed light on the links between innovation, industry evolution and employment generation, the Tinbergen Institute of Erasmus University Rotterdam, the School of Policy Studies at Georgia State University, and EIM Small- and Medium Sized Business Research and Consultancy in Zoetermeer, the Netherlands hosted a two day conference on the subject in Rotterdam and Zoetermeer, 29-30 August, 1997. The thirteen articles included in Innovation, Industry Evolution and Employment reflect a carefully edited and revised selection of the papers of this conference. What the articles have in common is that they link some measure of economic performance to technology and innovation, and they do it using a dynamic framework based on a longitudinal database that tracks micro-observations over time. http://repub.eur.nl/res/pub/15925/ 1999-06-01T00:00:00Z Relates a study that examined the extent to which small firms actually compete with large firms. Comparison of the determinants of large firm profitability with those of small firm profitability; Extent to which the profitability of small firms is determined by large firm profitability; Theories of strategic niches and dynamic complementarity; Hypotheses and measurement issues; Results. http://repub.eur.nl/res/pub/9719/ 1999-01-01T00:00:00Z The advent of a growing share of small firms in modern economies raises some intriguing questions. The most intriguing question undoubtedly is why so many smaller firms, which have traditionally been classified as sub-optimal scale firms, can exist. We suggest that, through pursuing a strategy of compensating factor differentials, that is by remunerating and deploying factors of production differently than their larger counterparts, small firms are able to compensate for size-inherent cost disadvantages. Using a sample of over seven thousand Dutch manufacturing firms, we find considerable evidence that such a strategy of compensating factor differentials is pursued within a European context. When viewed through a static lens, the existence of such a strategy, while making small and sub-optimal scale firms viable, suggests that they impose a net welfare loss on the economy. However, when viewed through a dynamic lens, the findings of a positive relationship between firm age and employee compensation as well as firm age and firm productivity suggest that there may be at least a tendency for the inefficient firm of today to become the efficient firm of tomorrow. 5 Are Small Firms Really Sub-Optimal? http://repub.eur.nl/res/pub/7779/ 1998-02-09T00:00:00Z A large literature has emerged focusing on the post-entry performance of firms and, in particular, on the links between firm growth, survival, size and age. While these studies have resulted in findings that are sufficiently consistent as to constitute Stylized Facts, virtually all of these studies are based on manufacturing. The purpose of this paper is to fill this gap in knowledge about the role of non- manufacturing in industrial organization, and in particular, in the post-entry performance of firms, or what happens to firms subsequent to entering an industry. We suggest theoretical reasons why the relationships between firm age and size on the one hand, and survival and growth on the other may, in fact, not be the same in services as they are for manufacturing. We use a longitudinal data base for Dutch firms in the retail and hotel and catering sectors to identify around 13,000 new-firm start-ups and 47,000 incumbents in the services and track them over subsequent years. We are then able test to see whether the Stylized Results identified based on manufacturing still hold in the services. The results suggest that the most fundamental relationships between firm size, age, survival and growth are strikingly different for services than for manufacturing. In terms of the dynamics of industrial organization, services may, in fact, not simply mirror the manufacturing sector. http://repub.eur.nl/res/pub/7777/ 1998-01-31T00:00:00Z The purpose of this paper is to show how institutional and evolutionary economics provide better insights as to why some firms survive and others do not than does neoclassical economics. At the heart of the evolutionary theory is the view that new firms are a manifestation of diversity and that their subsequent survival is shaped by the selection process. Despite immense institutional and historical differences across these different economic systems such as those in North America, Japan and Europe, evolutionary economics explains the role that diversity, selection and learning plays in economic development. We use a Dutch data set and a model on who survives and who doesn't to explain this role. http://repub.eur.nl/res/pub/7778/ 1998-01-31T00:00:00Z Despite the pervasive phenomenon of scale economies the majority of firms has always been small firms. The emergence of small firms as a means of economic development on both sides of the Atlantic has been one of the major new topics of economic policy since the 1980s. This has drawn renewed attention to the question of how small firms are able to exist. The theories of strategic niches and dynamic complementarity imply that small firms seek out markets where they are able to avoid competition with their larger counterparts. In this paper we test the validity of these theories by examining the extent to which small-firm profitability is set by large-firm profitability. We find considerable evidence that the price-cost margins of small firms do not tend to follow those of large firms. This is interpreted as supporting the theories that small firms pursue a strategy of producing in distinct product niches. http://repub.eur.nl/res/pub/7792/ 1997-09-30T00:00:00Z The purpose of this paper is to suggest that a fundamental shift in Europe, along with the other OECD countries, is taking place. This shift is from the managed economy to the entrepreneurial economy. While politicians and policy makers have made a plea for guidance in the era of entrepreneurship, scholars have been slow to respond. The purpose of this paper is to make a first step identifying and articulating these differences. We do this by contrasting the most fundamental elements of the newly emerging entrepreneurial economy with those of the managed economy. We identify fifteen trade-offs confronting these two polar worlds. The common thread throughout these trade-offs is the increased role of new and small enterprises in the entrepreneurial economy. A particular emphasis is placed on changes in economic policy demanded by the entrepreneurial economy vis-à-vis the managed economy. We then explore whether restructuring towards the entrepreneurial economy has been conducive to economic growth and job creation. Our empirical analysis links the stage of the transition towards an entrepreneurial economy to the growth rates of European countries over a recent period. We find that those countries which have introduced a greater element of entrepreneurship have been rewarded with additional growth. http://repub.eur.nl/res/pub/7801/ 1997-01-13T00:00:00Z Recent studies show that the likelihood of survival differs significantly across firms. Both firm and industry characteristics are hypothesized to account for this heterogenity. Using a longitudinal database of manufacturing firms we investigate whether firm or industry characteristics dominate. Our evidence suggests that both firm- and industry-specific characteristics shape new-firm survival during the first years subsequent to entry. However, in the longer run, most of the industry factors have little influence on the likelihood of survival, but firm-specific characteristics still exert a considerable influence in shaping firm survival rates. http://repub.eur.nl/res/pub/9689/ 1996-01-01T00:00:00Z http://repub.eur.nl/res/pub/9692/ 1996-01-01T00:00:00Z This paper introduces the special issue of The Review of Industrial Organization on The Dynamics of Industrial Organization. What binds these papers together is a focus on markets in motion—the process by which new firms enter an industry, either grow and survive, or else ultimately exit out of the industry. In contrast to more traditional static analyses, the concern of these papers is identifying where do firms come from and what happens subsequent to their entry. Influences of geographic as well as product space are found to exert an influence on the dynamics of industrial organization.