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Entrepreneurship and its determinants in a cross-country setting

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Abstract

The relative stability of differences in entrepreneurial activity across countries suggests that other than economic factors are at play. The present paper offers some new thoughts about the determinants of entrepreneurial attitudes and activities by testing the relationship between institutional variables and cross-country differences in the preferences for self-employment as well as in actual self-employment. Data of the 25 member states of the European Union as well as the US are used. The results show that country specific (cultural) variables seem to explain the preference for entrepreneurship, but cannot explain actual entrepreneurship. The present paper also introduces the remaining four papers of the special issue of the Journal of Evolutionary Economics, which center around the theme Entrepreneurship and Culture.

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Notes

  1. See Swedberg (2000) for views from other parts of the social sciences.

  2. See Blau (1987); Acs et al. (1994); Carree et al. (2002).

  3. See Wennekers et al. (2005) and Van Stel et al. (2005).

  4. See Masuda (2006) for an analysis of Japanese regions.

  5. They refer to the edition of Essai sur la Nature du Commerce en Général translated by H. Higgs 1931, London: McMillan.

  6. As quoted by Grilo and Irigoyen (2006).

  7. For instance, see Van Stel (2005) for data of 23 OECD countries over a recent period of some 30 years.

  8. See Reynolds et al. (2005) for a survey of the Global Entrepreneurship Monitor data set.

  9. Another phenomenon which is underresearched is the rise is variance of the rate of entrepreneurship until 1992—it more than doubled in the period 1972–1992 for the 23 OECD countries of the Compendia set—and its stabilization afterwards.

  10. See the contributions by Busenitz et al. (2000), Stevenson and Lundström (2001) and by the Global Entrepreneurship Monitor teams (Reynolds et al. 1999, 2002; Acs et al. 2005).

  11. See Stevenson and Lundström (2001) and Audretsch et al. (2007a) for surveys of entrepreneurship policies.

  12. Grilo and Thurik (2006) follow the setup of Grilo and Irigoyen (2006) while specific attention is given to differences between the eight former communist member states and the 17 other EU member states. The most striking result is the higher influence of risk tolerance in shaping both latent and actual entrepreneurship in transition economies relative to market economies.

  13. The dummy coefficients in the ‘preference’ equation are negative for all 25 European countries and almost always significant (with the exception of four countries: Cyprus, Ireland, Lithuania and Portugal).

  14. The dummy coefficients in the ‘actual’ equation are negative for six European countries (France, Luxembourg, Portugal Malta, Latvia and Slovenia) but significantly only for France and Luxembourg. They are positive for all remaining 19 countries but significantly only for Belgium, Greece, Finland, Cyprus, Czech Republic, Hungary, Poland and Slovakia.

  15. Here we depart from the North (1994) approach where institutions are defined to include culture but where a distinction between the two is also made (formal constraints such as rules, laws and constitutions versus informal constraints such as norms of behavior, conventions, etc.).

  16. The coefficients are taken from Table 3, columns 2 and 5, respectively, in Grilo and Thurik (2006, 90–91). For the US we take a value of zero since it is the benchmark country.

  17. The other dimensions of the ‘Frazer’ index are: size of government (expenditures, taxes and enterprises); legal structure and security of property rights; access to sound money; and freedom to trade internationally. They are not used in the present analysis.

  18. Consequently, this effect is expected to vanish slowly over time.

  19. From Grilo and Irigoyen (2006) and Grilo and Thurik (2005b, 2006) we know that differences in the effects on the preference for entrepreneurship and actual entrepreneurship can be sizable.

  20. The correlation coefficient between PRE and ACT is positive but low (0.24) while that between PREFER and PRE is 0.91 and that between ACTUAL and ACT is 0.82.

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Acknowledgement

The authors would like to thank Sjoerd Beugelsdijk, Isabel Grilo, Lorraine Uhlaner, Sander Wennekers, and the participants in the workshop on Entrepreneurship and Culture, Jena, February 7, 2005) for their comments. The workshop was a joint effort of the Max Planck Institute of Economics in Jena, EIM Business and Policy Research in Zoetermeer and the Economics Faculty of the Friedrich Schiller Universität Jena. This paper has been written in the framework of the research program SCALES carried out by EIM and financed by the Dutch Ministry of Economic Affairs.

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Freytag, A., Thurik, R. Entrepreneurship and its determinants in a cross-country setting. J Evol Econ 17, 117–131 (2007). https://doi.org/10.1007/s00191-006-0044-2

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