Nascent Entrepreneurship and the Level of Economic Development

Based upon two strands of literature, this paper hypothesizes a U-shaped relationship between a country's rate of entrepreneurial dynamics and its level of economic development. This would imply a different scope for entrepreneurship policy across subsequent stages of development. Regressing gl...

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Bibliographic Details
Published in:Small business economics 2005-04, Vol.24 (3), p.293-309
Main Authors: Wennekers, Sander, van Stel, André, Thurik, Roy, Reynolds, Paul
Format: Article
Language:English
Subjects:
Appropriate technology
Business economics
Business ownership
Control variables
Correlation analysis
Developing countries
Economic development
Economic theory
Economies of scale
Education
Entrepreneurs
Entrepreneurship
Population growth
Public policy
Self employment
Small and medium sized enterprises
Start up firms
Studies
Technological innovation
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Summary:Based upon two strands of literature, this paper hypothesizes a U-shaped relationship between a country's rate of entrepreneurial dynamics and its level of economic development. This would imply a different scope for entrepreneurship policy across subsequent stages of development. Regressing global entrepreneurship (GEM) 2002 data for nascent entrepreneurship in 36 countries on the level of economic development as measured either by per capita income or by an index for innovative capacity, we find support for a U-shaped relationship. The results suggest that a 'natural rate' of nascent entrepreneurship is to some extent governed by 'laws' related to the level of economic development. For the most advanced nations, improving incentive structures for business start-ups and promoting the commercial exploitation of scientific findings offer the most promising approach for public policy. Developing nations, however, may be better off pursuing the exploitation of scale economies, fostering foreign direct investment and promoting management education.
ISSN:0921-898X
1573-0913
DOI:10.1007/s11187-005-1994-8