There are mainly four different types of entrepreneurial venture that includes scalable, social entrepreneurs, small business and large companies. Entrepreneurs in every state conduct their operations with having limited resources and capital along with risk elements as to perform their operation and contribute in country economy.
Mentioned below there are numerous form of entrepreneurial ventures defined below: Small business entrepreneurship: In Australian economy there are number of small-business ventures that widely contributes in country GDP and economic growth.
These ventures are mainly run by sole individual, small ratio of employees, family and partners. With the effective contribution of these entrepreneurial ventures country can effectively able to increase their growth prospective that will further allow them to increase their international image in global marketplace. A specific example regarding property rights is the fact that until private firms with more than seven workers were not even allowed to operate legally in China Dorn It might be said that the production factors capital, labour, technology, and entrepreneurship are the proximate causes of economic development, while institutions are a fundamental cause of economic development Acemoglu et al.
A process in which an economy finds out—self- discovers—what it can be good at, out of the many products that already exist. Their role is to discover that a certain good, already well-established in world markets, can be produced at home at low cost Rodrik ; Hausmann and Rodrik Even if entrepreneurs cannot appropriate all these gains for themselves, their discoveries generate large social gains for their economies.
Spurring entrepreneurs to invest in their home economy is said to be one of the most important aspects of stimulating growth in poor countries Rodrik 44— Investing refers here to innovation e. These investments trigger the combination of capital investment and technological change. In developing countries the large firms are missing, and in transition countries there are large 1 In fragile and failed states, entrepreneurship has another role in building up the private sector.
From another starting point, the same counts for formerly communist countries. This means that small firms will be the prime movers in the process of structural change in developing and transition economies. We expect that the level of growth-oriented entrepreneurship in a country is a more relevant driver of economic growth than the mostly used indicators of entrepreneurship like the self- employment and new firm formation.
In contrast to rich countries, entrepreneurship in low income countries is mainly driven by necessity Bosma et al. Most new businesses in low income countries are started out of necessity, in contrast to high income countries, where entrepreneurship is most often opportunity driven. This is reflected in the finding that in poor countries self-employed are less happy than employees, while the reverse is true in high income countries Blanchflower and Oswald ; Graham Entrepreneurs in low income countries most often start a business because they have no other way of earning a living.
These entrepreneurs are not likely to be involved in a process of self-discovery; their actions are not likely to have an effect on the restructuring and diversification of the poor economies Rodrik Studies exploring differences in entrepreneurship across countries often focus on the incidence of new firm registration or self-employment, which may not be reliable indicators when applied to transition and developing countries with significant informal economies and fewer alternatives to self-employment.
Many studies have used the total entrepreneurial activity TEA index, but that also includes the more speculative category of nascent entrepreneurs individuals preparing a new business. In the current study we investigate whether the presence of growth-oriented entrepreneurs is a more important determinant of national economic growth than entrepreneurial activity in general.
In the current paper we will perform regression analyses with next to the general YB index, the YB high growth expectation rate and the YB medium growth expectation rate as independent variables and compare their impact on economic growth with the impact of the general YB index.
The data and model used in this study are described below. We use a sample of 36 countries participating in the GEM in The sources and definitions of these variables are listed below.
The YB medium growth rate reveals some similarity with the entrepreneurship indicator by Djankov et al. Abramovitz Given the low number of observations we are forced to use a combined index in our model. Even though there are huge problems in measuring technological capabilities and institutions see Lall , the composite GCI is probably the best combined index available that covers these two factors simultaneously.
We investigate whether growth-oriented entrepreneurship may be considered a determinant of economic growth, alongside the well-known determinants technology, public institutions, and the macroeconomic environment, which are captured by the GCI.
As both entrepreneurship and the factors underlying the GCI are assumed to be structural characteristics of an economy, we do not want to explain short term economic growth but rather growth in the medium term.
Therefore we choose average annual growth over a period of four years —05 as the dependent variable in this study. Following Van Stel et al. Hence, there may also be a reversed effect of economic growth on high expectation entrepreneurship. To limit the potential impact of reversed causality we include lagged GDP growth as an additional explanatory variable. In addition we also test whether the effect of YB is different for transition countries.
This is tested by defining separate YB variables for different groups of countries high income, transition, and low income countries. Our model is represented by equations 1 and 2. These equations are estimated separately by OLS.
The expectation that growth-oriented young businesses contribute more to national economic growth than young businesses in general corresponds to b2 c2 being larger than b1 c1.
In these equations subscripts t and t-1 loosely indicate that the independent variables are measured prior to the dependent variable. The exact years and periods for which the variables are measured can be found in the variable description above.
From Table 1 and Figures 1 and 2 it can be seen that the ranking of countries in terms of YB or YB high growth may be quite different. In Section 4 we will investigate more thoroughly whether YB and high growth YB affect national economic growth differently. We also measure YB rates in a year preceding the period over which the dependent variable is measured By including lagged independent variables as well as a lagged dependent variable on the right-hand side, we basically measure the effects in a Granger-causality type of framework Granger Still, the possibility of reversed effects cannot be ruled out completely.
With the exception of Hungary and Slovenia, the transitional countries can be classified as relatively poor as well.
The results presented in Table 2 show that the impact of entrepreneurial activity is significantly positive for rich countries, but effectively zero for poor countries. The presence of growth-oriented entrepreneurs seems to be more important for achieving GDP growth than general entrepreneurship. Comparing the coefficients of the various YB rates, we see that the impact of YB6 is greater when compared to the impact of YB in general.
Meanwhile the impact of YB20 is even greater, but not always statistically significant. Having more growth-oriented entrepreneurs seems to be particularly important in transition countries. Both the magnitude and the statistical significance of the estimated coefficient point at a stronger impact compared to rich or poor countries. There are many reasons that could explain the importance of growth-oriented entrepreneurs in transition countries Smallbone and Welter First, there are many entrepreneurial opportunities in formerly state-dominated sectors.
Second, many highly qualified individuals lost their jobs at state-financed organizations e. Third, there are many highly qualified potential entrepreneurs in these countries especially in Eastern European countries , who do not face the opportunity costs of working for large public or private organizations. Fourth, those highly qualified potential entrepreneurs are also well connected to the power networks that were, and to a large extent still are important in the political and economic arena of these countries, which takes away some barriers for high growth firms in these countries.
Summarizing, it may be argued that in transition economies high growth opportunities are more widely available and hence, a higher number of growth-oriented entrepreneurs are willing to act on these opportunities may be particularly fruitful for achieving growth in these countries. However, we should be aware of the large diversity in the group of transition countries, which comprises countries like Russia and China, as well as Hungary and Slovenia.
We will take a closer look on a few low income and transition countries in the next sections. Our regression results should be interpreted with care as the analysis is based on a limited number of observations 36 countries.
As a test of robustness we estimated the models leaving out one country at a time, i. Although t-values sometimes dropped a little, coefficients and t-values were generally in line with those reported in Table 2. The country that matters the most for the results obtained in Table 2 is China.
When leaving this country out of the sample, the coefficient t-value for the transition countries is 0. The low t-values are in part due to the low number of observations.
Note however that the coefficients are very similar to the full sample estimates reported in Table 2. Therefore we feel that our results are quite robust to the potential influence of outliers. Nevertheless, given the low number of observations, the results should only be seen as a first illustration of how the impact of different types of entrepreneurship may differ between groups of countries with different levels of development. Chile stands out because of a particularly high rate of growth-oriented entrepreneurship, while Mexico has a particularly low rate of growth-oriented entrepreneurship.
In contrast to rich countries, entrepreneurship in developing economies is mainly driven by necessity: self-employment is often the only occupational choice given a paucity of other sources of employment necessity-based entrepreneurship; see: Acs and Amoros ; Bosma et al. The actions of most of the entrepreneurs in low income countries are not likely to have an effect on the restructuring and diversification of the poor economies. This would be the whole story if the rates of growth-oriented entrepreneurship would also be marginal in these economies.
This is only the case for Mexico. Next to Chile—where opportunity-driven entrepreneurship is dominant—Brazil, India, and Argentina perform quite well with respect to growth-oriented entrepreneurship.
This means that there still is a substantial group of entrepreneurs in low income countries that might get involved in a process of self-discovery. The problem in practice is that in contrast to rich and transition economies, growth-oriented entrepreneurship is less likely to be realized in developing economies, due to constraints on the provision of capital and skilled labour. An additional constraint in low income countries is that there is generally a lack of foreign larger companies, which could act as a training ground for prospective growth-oriented entrepreneurs, and could open up distributions channels for new fledgling enterprises Knorringa One should make a distinction between productive manufacturing and resource extractive mining, oil activities here, as the former will be a more useful for the development of entrepreneurship than the latter.
Our study suggests that in transition countries, growth-oriented entrepreneurs make an important contribution to economic growth. They create new jobs with relatively high incomes which the small incumbent population of private firms cannot provide. This entrepreneurial growth process is facilitated by the relatively high levels of human capital in combination with relatively low opportunity costs of self-employment of the adult population.
The high degree of environmental dynamism in these countries—which is likely to positively affect the level of growth expectations and realizations of entrepreneurs in these countries—requires ambitious and well-connected entrepreneurs in order to translate these abundant opportunities in economic growth.
There are considerable differences within the group of transition countries. In contrast, in Russia these connections devolved into corruption, and faded in importance for ordinary citizens. Without a way to build trust or extend networks, Russians retreated into defensive involution, and engaged in predatory behaviour against those outside their small circles of friends.
There are also substantial differences in entrepreneurship rates within the groups of transition economies. China stands out because of particularly high rates of growth-oriented entrepreneurship cf. Hsu Even though the YB rate is below the average of transition countries, the growth of self-employment has been enormous, not only in the richer coastal provinces, but also in rural areas Mohapatra et al.
Research by Djankov et al. In addition, Russia has and had: see Hsu a particularly low rate of entrepreneurship in general as well. The striking difference between entrepreneurship rates in China and Russia can be explained by their different paths from socialism to capitalism: gradualism and a shock therapy see Burawoy In China the gradual transformation started with a policy of decollectivization decentralization of property relations in the late s and the promotion of smallscale industry, with a focus on promoting independent entrepreneurship.
Experimentation with new economic arrangements, for example privatization of small state-owned enterprises, has led to a favourable accumulation of productive capabilities in China. In contrast, Russia underwent a shock therapy in which the old communist regime was liquidated, with a focus on rapid privatization of the state sector. Close suggestions Search Search. User Settings. Skip carousel. Carousel Previous.
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