What is the Value of Entrepreneurship? A Review of Recent Research

43 Pages Posted: 29 Aug 2007  

Mirjam van Praag

University of Amsterdam - Department of Economics; Copenhagen Business School; Tinbergen Institute; IZA Institute of Labor Economics

Peter H. Versloot

University of Amsterdam

Date Written: August 2007

Abstract

This paper examines to what extent recent empirical evidence can collectively and systematically substantiate the claim that entrepreneurship has important economic value. Hence, a systematic review is provided that answers the question: What is the contribution of entrepreneurs to the economy in comparison to non-entrepreneurs? We study the relative contribution of entrepreneurs to the economy based on four measures that have most widely been studied empirically. Hence, we answer the question: What is the contribution of entrepreneurs to (i) employment generation and dynamics, (ii) innovation, and (iii) productivity and growth, relative to the contributions of the entrepreneurs' counterparts, i.e. the 'control group'? A fourth type of contribution studied is the role of entrepreneurship in increasing individuals' utility levels. Based on 57 recent studies of high quality that contain 87 relevant separate analyses, we conclude that entrepreneurs have a very important - but specific - function in the economy. They engender relatively much employment creation, productivity growth and produce and commercialize high quality innovations. They are more satisfied than employees. More importantly, recent studies show that entrepreneurial firms produce important spillovers that affect regional employment growth rates of all companies in the region in the long run. However, the counterparts cannot be missed either as they account for a relatively high value of GDP, a less volatile and more secure labor market, higher paid jobs and a greater number of innovations and they have a more active role in the adoption of innovations.

Keywords: entrepreneur, entrepreneurship, self-employment, productivity, economic development, growth, employment, innovation, patents, R&D, utility, remuneration, income

JEL Classification: D24, D31, E23, E24, J21, J28, J31, L26, M13

Suggested Citation

van Praag, Mirjam and Versloot, Peter H., What is the Value of Entrepreneurship? A Review of Recent Research (August 2007). ; IZA Discussion Paper No. 3014; Jena Economic Research Paper No. 2007-061. Available at SSRN: https://ssrn.com/abstract=1010568

Mirjam Van Praag (Contact Author)

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4096 (Phone)
+31 20 525 4182 (Fax)

Copenhagen Business School ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

Tinbergen Institute

Gustav Mahlerlaan
Amsterdam
Netherlands

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Peter H. Versloot

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

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