The Economic Impact of Entrepreneurship: Comparing International Datasets

Corporate Governance: An International Review, Forthcoming

41 Pages Posted: 4 Jan 2014

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University; Birmingham Business School; European Corporate Governance Institute (ECGI)

Sofia Johan

Florida Atlantic University - Finance; University of Vaasa; Tilburg Law and Economics Center (TILEC)

Minjie Zhang

Odette School of Business - University of Windsor

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2013

Abstract

Research Question/Issue: What is the impact of entrepreneurship on GDP/capita, unemployment, exports/GDP, and patents per population across countries? Is the impact of entrepreneurship mitigated by legal and cultural differences across countries? Do different international datasets provide different answers to these questions? We empirically compare the impact of entrepreneurship on GDP/capita, unemployment, exports/GDP, and patents per population across countries by examining three datasets from the World Bank, the OECD, and Compendia.

Research Findings/Insights: Based on a comprehensive sample of all available countries and years, with the World Bank data being the most comprehensive, we find entrepreneurship has a significantly positive impact on GDP/capita, exports/GDP, and patents per population, and a negative impact on unemployment. Inferences from the Compendia data are very consistent. By contrast, inferences from the OECD data are not supportive of any of these propositions.

Theoretical/Academic Implications: Our findings point to institutional and cultural impediments to the effectiveness of entrepreneurship. Most notably, the impact of entrepreneurship is significantly mitigated by excessively strong creditor rights that limit entrepreneurial risk taking. Furthermore, the data indicate cultural attitudes that are associated with low risk taking limit the effectiveness of entrepreneurship. By contrast, the impact of entrepreneurship on exports/GDP does not appear to be directly tied to costs of exporting, which is perhaps best explained by the new economy goods and services created by entrepreneurs that depend less on such costs. For some subsets of the data we find evidence consistent with the view that top tier venture capital funds enhance the impact of entrepreneurship on GDP/capita. Finally, our results show how different definitions of new business entry matter for empirical analysis of entrepreneurship across countries.

Practitioner/Policy Implications: The data highlight the importance of access to finance without downside costs so that entrepreneurs are encouraged to take risk. Further, the data highlight institutional differences in risk attitudes more generally inhibit risk taking and thereby limit the effectiveness of entrepreneurship. As well, the data highlight a central role for careful measurement of entrepreneurial activities and for inclusion of as many countries and years as possible in order to effectively analyze the impact of entrepreneurship.

Keywords: Entrepreneurship, Law and Economics, Credit, Governance and Risk-Taking, Uncertainty Avoidance, Culture, Exports, Unemployment, Patents, Venture Capital

JEL Classification: L26, G24

Suggested Citation

Cumming, Douglas J. and Johan, Sofia A. and Zhang, Minjie, The Economic Impact of Entrepreneurship: Comparing International Datasets (October 1, 2013). Corporate Governance: An International Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2373601

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/douglas-cumming

Sofia A. Johan

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/sofiajohan

University of Vaasa ( email )

P.O. Box 700
Wolffintie 34
FIN-65101 Vaasa, FI-65101
Finland

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Minjie Zhang (Contact Author)

Odette School of Business - University of Windsor ( email )

401 Sunset Avenue
Windsor, Ontario N9B 3P4
Canada

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