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SBE Lect 4_ Part 5: Ch6 defining and measuring start ups (Implications…
SBE Lect 4_ Part 5: Ch6 defining and measuring start ups
Model and Data
Main independent variables:
Total Entrepreneurial Activity 2002 (TEA)
GDP per capita (YCAP)
TEA * YCAP (interaction term)
TEA in rich and poor countries
TEA in developing, transition, and developed countries
Control variables
Initial per capita income (catch-up effect)
Lagged dependent variable: average annual growth of GDP, 1994-1998 (reversed causality)
Growth Competitiveness Index
Dependent variable:
◦ Average annual growth of GDP 1999-2003 (medium term growth)
Implications
Value = zero for per capita income level of 20,000 US $ of 2001 (Spain)
Effect of entrepreneurship on national economic growth increases with per capita income
Effect of TEA on economic growth can be written as: -0.428 + 0.021 GDP per capita
Negative effect in poorer countries may point at presence of necessity entrepreneurship and a shortage of large (efficient) companies. --> Stimulate (productive) entrepreneurship in developing countries?
Conclusions
It is not easy or straightforward to define the ‘new business’
◦ It is neither easy or straightforward to measure new businesses or the start-up rate
New businesses are important:
◦ For individuals, society, industries, and the economy
The importance of new businesses for economic growth
The impact of new business on employment goes through three stages
The relation between the new business rate and the level of economic development seems to follow a U-shape
The effect of new business on economic growth depends on level of economic development