The Relationship between Entrepreneurship and Economic Development: Is it U-Shaped?

82 Pages Posted: 14 Sep 2011

See all articles by S. Wennekers

S. Wennekers

EIM Netherlands - Business and Policy Research

André van Stel

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA); University of Amsterdam; EIM Business and Policy Research

Martin A. Carree

University of Maastricht - Department of Organization & Strategy

Roy Thurik

Montpellier Business School; Erasmus University Rotterdam (EUR) - Centre for Advanced Small Business Economics (CASBEC); Erasmus Research Institute of Management (ERIM); EIM Netherlands - Business and Policy Research; Tinbergen Institute

Abstract

Following a centuries-long decline in the rate of self-employment, a discontinuity in this downward trend is observed for many advanced economies starting in the 1970s and 1980s. In some countries the rate of self-employment appears to increase. At the same time, cross-sectional analysis shows a U-shaped relationship between start-up rates of enterprise and levels of economic development. We provide an overview of the empirical evidence concerning the relationship between independent entrepreneurship, also known as self-employment or business ownership, and economic development. We argue that the reemergence of independent entrepreneurship is based on at least two 'revolutions.' If we distinguish between solo self-employed at the lower end of the entrepreneurship spectrum, and ambitious and/or innovative entrepreneurs at the upper end, many advanced economies show a revival at both extremes. Policymakers in advanced economies should be aware of both revolutions and tailor their policies accordingly.

Keywords: entrepreneurship, self-employment, business ownership, business start-ups, economic development, U-shape, L-shape

JEL Classification: L26, J24, M13, O14, O31

Suggested Citation

Wennekers, Sander and van Stel, André and Carree, Martin A. and Thurik, Roy, The Relationship between Entrepreneurship and Economic Development: Is it U-Shaped?. Foundations and Trends in Entrepreneurship Vol. 6, No. 3, 2010. Available at SSRN: https://ssrn.com/abstract=1927478

Sander Wennekers (Contact Author)

EIM Netherlands - Business and Policy Research ( email )

Postbus 7001
2701 AA Zoetermeer
Netherlands
31 79 3413634 (Phone)

André Van Stel

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

EIM Business and Policy Research

Bredewater 26
P.O. Box 7001
2701 AA Zoetermeer
Netherlands

Martin A. Carree

University of Maastricht - Department of Organization & Strategy ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Roy Thurik

Montpellier Business School

France

Erasmus University Rotterdam (EUR) - Centre for Advanced Small Business Economics (CASBEC) ( email )

3000 DR Rotterdam
Netherlands
+31 10 408 2232 (Phone)
+31 10 408 9146 (Fax)

HOME PAGE: http://www.thurik.com

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

EIM Netherlands - Business and Policy Research

Postbus 7001
2701 AA Zoetermeer
Netherlands
+31 79 341 3634 (Phone)
+31 79 331 3742 (Fax)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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