Entrepreneurial activity and economic growth: A dynamic data panel analysis of European countries

Abstract

Objective: The goal of this article is to analyse the impact of different measures of entrepreneurial activity, namely through attitudes and behaviour, on the economic growth of 21 European countries. The goal is to assess the impact of entrepreneurial activity, measured by perceived capabilities, perceived opportunities, entrepreneurial activity, and total early stage, on the economic growth of these countries.

Research Design & Methods: This study is based on a quantitative methodology and uses a data panel covering 21 European countries and a period from 2001 to 2019 (196 observations). A statistical analysis of the dependent, independent and control variables was performed, panel data stationarity analysis was carried out, and three multiple linear regression models were estimated using the generalized method of moments (dynamic panel data).

Findings: The results suggest that the entrepreneurial activity driven by the opportunity has a positive impact on the gross domestic product per capita and, as such, stimulate the economic growth of the European countries considered in this sample. However, entrepreneurial activity at an early stage and the skills and knowledge to start a new business have a negative impact on the economic growth of these countries.

Implications & Recommendations: In general, this study suggests that entrepreneurship driven by opportunity (directly or indirectly by perceived capacities) is a key factor in stimulating the European countries’ economic growth considered in this sample.

Contribution & Value Added: This study complements the existing literature that analyses the impact of entrepreneurship on economic growth, but using a sample of countries in Europe (there are few empirical studies for this purpose on European countries), and it is innovative because three different measures of entrepreneurial activity are tested, a more generic one and two other measures of entrepreneurial behaviour and attitudes collected by the global entrepreneurship monitor (GEM) to assess their impact of entrepreneurship on countries’ economic growth.

Keywords

perceived capacity, perceived opportunity, entrepreneurship, economic growth, European countries

Author Biography

Sofia Gomes

Assistant Professor at the Department of Economics and Management of University Portucalense. She is a researcher at REMIT – Research on Economics, Management and Information Technologies. PhD in Applied Economics. Her research interests include entrepreneurship, digital economy, corporate finance.

Pedro Ferreira

Assistant Professor at the Department of Economics and Management of University Portucalense, and an In-vited Professor at Porto Polytechnic Institute. He is a researcher at REMIT – Research on Economics, Manage-ment and Information Technologies and at CEOS.PP. PhD in Applied Economics. His research interests include entrepreneurship, HRM and organizational behaviour, marketing and consumer behaviour.

References

1. Ackerman, P. L., Beier, M. E., & Bowen, K. R. (2002). What we really know about our abilities and our knowledge. Personality and Individual Differences, 33(4), 587-605. https://doi.org/10.1016/S0191-8869(01)00174-X
2. Ács, Z. J., & Naudé, W. (2011). Entrepreneurship, stages of development, and industrialization (WIDER Work-ing Paper 2011/080). Helsinki: World Institute for Development Economic Research.
3. Ács, Z. J., & Szerb, L. (2010). Global entrepreneurship and the United States. DTIC Document. Retrieved from: https://thegedi.org/wp-content/uploads/2011/04/SBA_Gedi1.pdf on April 9, 2021.
4. Ács, Z. J., & Varga, A. (2005). Entrepreneurship, agglomeration and technological change. Small Business Economics, 24, 323-334. https://doi.org/10.1007/s11187-005-1998-4
5. Alheet, A. F. (2019). Investigating the relationship between entrepreneurial activity and economic growth: a case of Middle East. Entrepreneurship and Sustainability Issues, 7(2): 1036-1047. https://doi.org/10.9770/jesi.2019.7.2(17)
6. Almodóvar-González, M., Fernández-Portillo, A. & Díaz-Casero, J. (2020). Entrepreneurial activity and eco-nomic growth – a multi-country analysis. European Research on Management and Business Economics, 26(1), 9-17. https://doi.org/10.1016/j.iedeen.2019.12.004
7. Amorós, J. E., Fernández, C., & Tapia, J. (2012). Quantifying the relationship between entrepreneurship and competitiveness development stages in Latin America. International Entrepreneurship and Management Journal, 8, 249-270. https://doi.org/10.1007/s11365-010-0165-9
8. Arab, Z., & Sofiyabadi, J. (2013). Entrepreneurship indicators with an emphasis on Global Entrepreneurship Monitor. IJRRAS, 16(2), 288-296.
9. Audretsch, D. B. (2007). Entrepreneurship capital and economic growth. Oxford Review of Economic Policy, 23, 63-78. https://doi.org/10.1093/oxrep/grm001
10. Audretsch, D. B., & Keilbach, M. (2008). Resolving the knowledge paradox: Knowledge-spillover entrepre-neurship and economic growth. Research Policy, 37(10), 1697-1705. https://doi.org/10.1016/j.respol.2008.08.008
11. Audretsch, D., & Keilbach, M. (2004). Entrepreneurship capital and economic performance. Regional Studies, 38, 949-959. https://doi.org/10.1080/0034340042000280956
12. Avnimelech, G., Zelekha, Y., & Sharabi, E. (2014). The effect of corruption on entrepreneurship in developed vs non- developed countries. International Journal of Entrepreneurial Behavior & Research, 20, 237-262. https://doi.org/10.1108/IJEBR-10-2012-0121
13. Baliamoune-Lutz, M. (2015). Taxes and entrepreneurship in OECD countries. Contemporary Economic Policy, 33, 369-380. https://doi.org/10.1111/coep.12079
14. Baptista, R., Escária, V. & Madruga, P. (2005). Entrepreneurship, Regional Development and Job Creation: the Case of Portugal (Discussion Paper # 0605). Munich: Max Planck Institute.
15. Baumol, W. J., & Strom, R. J. (2007). Entrepreneurship and economic growth. Strategic Entrepreneurship Journal, 1, 233-237. https://doi.org/10.1002/(ISSN)1932-443X
16. Bohlmann, C., Rauch, A., & Zacher, H. (2017). A lifespan perspective on entrepreneurship: Perceived oppor-tunities and skills explain the negative association between age and entrepreneurial activity. Frontiers in Psychology, 8(DEC), 1-11. https://doi.org/10.3389/fpsyg.2017.02015
17. Bosma, N. (2013). The Global Entrepreneurship Monitor (GEM) and its impact on entrepreneurship re-search. Foundations and Trends in Entrepreneurship, 9(2), 143-248. https://doi.org/10.1561/0300000033
18. Bosma, N., Ács, Z., Autio, E., Coduras, A., & Levie, J. (2009). GEM executive report 2008. Babson Park, MA: Babson College.
19. Bosma, N., Content, J., Sanders, M., & Stam, E. (2018). Institutions, entrepreneurship, and economic growth in Europe. Small Business Economics, 51(2), 483-499. https://doi.org/10.1007/s11187-018-0012-x
20. Bosma, N., Stam, E., & Wennekers, S. (2012). Entrepreneurial employee activity: a large scale international study. Tjalling C. Koopmans Research Institute, 12(August 2012), 1-13.
21. Bosma, N., Stam, F. & Schutjens, V. (2006). Creative Destruction and Regional Competitiveness. Scales Re-search Reports H200624. Brussels: EIM Business and Policy Research.
22. Carlsson, B., Acs, Z. J., Audretsch, D. B., & Braunerhjelm, P. (2009). Knowledge creation, entrepreneurship, and economic growth: A historical review. Industrial and Corporate Change, 18, 1193-1229. https://doi.org/10.1093/icc/dtp043
23. Carree, M. A., & Thurik, A. R. (2008). The lag structure of the impact of business ownership on economic performance in OECD countries. Small Business Economics, 30(1), 101-110. https://doi.org/10.1007/s11187-006-9007-0
24. Carree, M., Van Stel, A. Thurik, R. & Wennekers, S. (2007). The Relationship between Economic Development and Business Ownership Revisited. Entrepreneurship and Regional Development, 19(3), 281-291. https://doi.org/10.1080/08985620701296318
25. Carreee, M. & Thurik, A. R. (2008). The lag Structure of the Impact of Business Ownership on Economic Per-formance in OECD Countries. Small Business Economics, 30, 101-110. https://doi.org/10.1007/s11187-006-9007-0
26. Coulibaly, D., & Goueu, F. Z. (2019). An Empirical Analysis of the Link between Economic Growth and Exports in Côte d’Ivoire. International Business Research, 12(9), 94. https://doi.org/10.5539/ibr.v12n9p94
27. Deller, S.C. (2007). Microenterprises and Economic Growth: A Panel Study of the US States 1977 to 1997. Applied Economics Letters, 16, 1307-1312. https://doi.org/10.1080/13504850701367361
28. Doran, J., McCarthy, N. & O’Connor, M. (2018). The role of entrepreneurship in stimulating economic growth in developed and developing countries. Cogent Economics & Finance, 6(1), 1442093. https://doi.org/10.1080/23322039.2018.1442093
29. Ferreira, J. J., Fayolle, A., Fernandes, C., & Raposo, M. (2017). Effects of Schumpeterian and Kirznerian entre-preneurship on economic growth: Panel data evidence. Entrepreneurship & Regional Development, 29(1-2), 27-50. https://doi.org/10.1080/08985626.2016.1255431
30. Fritsch, M. (2004). Entrepreneurship, Entry and Performance of New Business Compared in two Growth Re-gimes: East and West Germany (Discussion Paper # 4104). Munich: Max Planck Institute. https://doi.org/10.1007/s00191-004-0230-z
31. Fritsch, M. (2008). How does new business formation affect regional development? Introduction to the spe-cial issue. Small Business Economics, 30(1), 1-14. https://doi.org/10.1007/s11187-007-9057-y
32. Fritsch, M. & Muller, P. (2004). Regional Growth Regimes Revisited – The Case of West Germany (Freiberg Working Papers No 2004/6). Freiberg: TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
33. Galindo, M. Á., & Méndez, M. T. (2014). Entrepreneurship, economic growth, and innovation: Are feedback effects at work?. Journal of Business Research, 67(5), 825-829. https://doi.org/10.1016/j.jbusres.2013.11.052
34. Global Entrepreneurship Monitor (2020). GEM Key Indicators. Retrieved from: https://www.gemconsortium.org/data on October 14, 2020
35. World Bank. World Development Indicators (2020). Retrieved from: https://databank.worldbank.org/source/ world-development-indicators on October 14, 2020
36. Greene, W. (2020). Econometric Analysis. 8th edition. London: Pearson Education Limited.
37. Gries, T., & Naudé, W. (2010). Entrepreneurship and structural economic transformation. Small Business Economics, 34(1), 13-29. https://doi.org/10.1007/s11187-009-9192-8
38. Hartog, C., Parker, S., van Stel, A. & Thurik, R. (2010). The Two-Way Relationship Between Entrepreneurship and Economic Performance. Scientific Analysis of Entrepreneurship and SMEs (Scales Research Reports H200822): Brussels: EIM Business and Policy Research.
39. Hashi, I., & Krasniqi, B. A. (2011). Entrepreneurship and SME growth: Evidence from advanced and laggard transition economies. International Journal of Entrepreneurial Behavior & Research, 17(5), 456-487. https://doi.org/10.1108/13552551111158817
40. Hayashi, F. (2000). Econometrics. Princeton: Princeton University Press
41. Hessels, J., & van Stel, A. (2011). Entrepreneurship, export orientation, and economic growth. Small Business Economics, 37(2), 255-268. https://doi.org/10.1007/s11187-009-9233-3
42. Hüning, H. (2017). Asset market response to monetary policy news from SNB press releases. North American Journal of Economics and Finance, 40(C), 160-177. https://doi.org/10.1016/j.najef.2017.02.003
43. Hüning, H. (2019). Swiss National Bank communication and investors uncertainty. North American Journal of Economics and Finance, 51(C), 101024. https://doi.org/10.1016/j.najef.2019.101024
44. Hurtado Rendón, A., Velásquez, H., & Támara, A. (2017). La creación de empresas bajo un enfoque estructural: Un caso de aplicación. Espacios, 38(24), 289-300. https://doi.org/10.1007/s11187-010-9307-2
45. Kirzner, I.M. (1973). Competition and Entrepreneurship. Chichago, IL: University of Chicago Press
46. Knight, F.H. (1921). Risk, uncertainty and profit. New York: Houghton Mifflin
47. Lahouel, B.B., Gaies, B., Zaied, Y.B., & Jahmane, A. (2019). Accounting for endogeneity and the dynamics of corporate social – corporate financial performance relationship. Journal Cleaner Production, 230(1), 352-364. https://doi.org/10.1016/j.jclepro.2019.04.377
48. Li, H., Yang, Z., Yao, X. & Zhang, J. (2012). Entrepreneurship and Growth: Evidence from China. China Econom-ic Review, 23(4), 948-961. https://doi.org/10.1016/j.chieco.2012.04.015
49. Marcotte, C. (2014). Entrepreneurship and innovation in emerging economies: Conceptual, methodological and contextual issues. International Journal of Entrepreneurial Behavior & Research, 20(1), 42-65. https://doi.org/10.1108/IJEBR-09-2012-0089
50. Marfatia, H. A. (2014). Impact of uncertainty on high frequency response of the U.S. stock markets to the Fed’s policy surprises. Quarterly Review of Economics and Finance, 54(3), 382-392. https://doi.org/10.1016/j.qref.2013.12.003
51. Marfatia, H. A. (2015). North American Journal of Economics and Finance Monetary policy ’s time-varying impact on the US bond markets: Role of financial stress and risks. North American Journal of Economics and Finance, 34, 103-123. https://doi.org/10.1016/j.najef.2015.08.006
52. Mariet Ocasio, V., & Mariet Ocasio, V. (2016). Financing village enterprises in rural Bangladesh: What deter-mines non- farm revenue growth?. International Journal of Development Issues, 15(1), 76-94. https://doi.org/10.1108/IJDI-09-2015-0057
53. Martin M., Picazo, M. & Navarro, J. (2010). Entrepreneurship, Income Distribution and Economic Growth. International Entrepreneurship Management Journal, 6, 131-141. https://doi.org/10.1007/s11365-010-0142-3
54. Mileva, E. (2007), Using Arellano-Bond dynamic panel in Stata. Economics Department, Fordham University. Retrieved from: https://www.studocu.com/row/document/university-of-mauritius/law-and-management/elitz-using-arellano-bond-gmmestimators/1633335 on April 9, 2021
55. Minniti, M., & Lévesque, M. (2010). Entrepreneurial types and economic growth. Journal of Business Ventur-ing, 25(3), 305-314. https://doi.org/10.1016/j.jbusvent.2008.10.002
56. Mojica, M., Gebremedhin, T. & Schaeffer, P. (2009). An Empirical Analysis of Link Between Entrepreneurship and Economic Growth in West Virginia (Research Paper 2009-2). Atlanta: Southern Agricultural Economics Association. https://doi.org/10.22004/ag.econ.46723
57. Naudé W. (2008). Entrepreneurship in Economic Development (UNU – WIDER, Research Paper, no 2008/20). Helsinki: World Institute for Development Economic Research. https://doi.org/10.1093/acprof:oso/9780199671656.003.0019
58. Noguera, M., Alvarez, C., & Urbano, D. (2013). Socio-cultural factors and female entrepreneurship. Interna-tional Entrepreneurship and Management Journal, 9(2), 183-197. https://doi.org/10.1007/s11365-013-0251-x
59. Olaison, L., & Meier Sørensen, B. (2014). The abject of entrepreneurship: Failure, fiasco, fraud. International Journal of Entrepreneurial Behavior & Research, 20(2), 193-211. https://doi.org/10.1108/IJEBR-09-2013-0143
60. Pittaway, L. (2005). Philosophies in entrepreneurship: A focus on economic theories. International Journal of Entrepreneurial Behavior & Research, 11(3), 201-221. https://doi.org/10.1108/13552550510598790
61. Schumpeter, J. (1911). Theory of economic development: An inquiry into profits, capital, credit, interest and the business cycle. Cambridge, MA: Harvard University Press
62. Schwab, K. & Sala-i-Martin, X. (2018). The global competitiveness Report 2017-2018. Geneva: World Economic Forum
63. Stam E., Kashifa, S., Hessels, S. & van Stel, A. (2007). High Growth Entrepreneurs, Public Policies and Economic Growth (Scales Research Reports H200608). Brussels: EIM Business and Policy Research.
64. Stam, E., & Van Stel, A. (2011). Types of entrepreneurship and economic growth. In A. Szirmai & M. Wim Naudé (eds.), Entrepreneurship, innovation, and economic development (pp. 78-95). Oxford: Oxford Uni-versity Press
65. Stam, E., Hartog, C., Van Stel, A., & Thurik, R. (2011). Ambitious entrepreneurship, high-growth firms and macroeconomic growth. In M. Minniti (ed.), The dynamics of entrepreneurship: Evidence from global en-trepreneurship monitor data (pp. 231-249). Oxford: Oxford University Press. https://doi.org/10.1093/acprof:o so/9780199580866.001.0001
66. Stoica, O., & Roman, A. (2020). The Nexus between Entrepreneurship and Economic Growth: A Comparative Analysis on Groups of Countries. Sustainability, 12(3), 1186. https://doi.org/10.3390/su12031186
67. Tsai, K., Chang, H. & Peng, C. (2016). Refining the linkage between perceived capability and entrepreneurial intention: roles of perceived opportunity, fear of failure, and gender. International Entrepreneurship and Management Journal, 12, 1127-1145. https://doi.org/10.1007/s11365-016-0383-x
68. Thurik R. (2009). Entrepreneurship, Economic Growth and Policy in Emerging Economies (UNU- WIDER, Re-search Paper no 2009/12). Helsinki: World Institute for Development Economic Research
69. Urbano, D., & Aparicio, S. (2016). Entrepreneurship capital types and economic growth: International evi-dence. Technological Forecasting and Social Change, 102(C), 34-44. https://doi.org/10.1016/j.techfore.2015.02.018
70. Valliere, D., & Peterson, R. (2009). Entrepreneurship and economic growth: Evidence from emerging and developed countries. Entrepreneurship and Regional Development, 21(5-6), 459-480. https://doi.org/10.1080/08985620802332723
71. Van Praag, C. M., & Versloot, P. H. (2007). What is the value of entrepreneurship?. A review of recent re-search. Small Business Economics, 29(4), 351-382. https://doi.org/10.1007/s11187-007-9074-x
72. Walker, J. K., Jeger, M., & Kopecki, D. (2013). The role of perceived abilities, subjective norm, and intentions. Journal of Entrepreneurship, 22(2), 181-202. https://doi.org/10.1177/0971355713490621
73. Wennekers, S., Van Stel, A., Carree, M., & Thurik, R. (2010). The relationship between entrepreneurship and economic development: Is it U-Shaped?. Foundations and Trends in Entrepreneurship, 6(3), 167-237. https://doi.org/10.1561/0300000023
74. Wooldridge, J. (2001). Applications of Generalized Method of Moments Estimation. Journal of Economic Perspectives, 15(4), 87-100.
75. Wong, P. K., Ho, Y. P., & Autio, E. (2005). Entrepreneurship, innovation and economic growth: Evidence from GEM data. Small Business Economics, 24(3), 335-350. https://doi.org/10.1007/s11187-005-2000-1
76. World Bank. World Development Indicators (2020). Retrieved from: https://databank.worldbank.org/source/ world-development-indicators October 14, 2020.