Abstract
We explore the channels under which entrepreneurship fosters productivity by disentangling its impact on national level economic efficiency and find that more entrepreneurship in aggregate is not always good for economic growth and, most importantly, identifying the form and activity of entrepreneurship is critical for policy-makers to better manage changes in their economies. Our national level results also suggest that the new product entrepreneurship and to a lesser extent improvement-driven opportunity entrepreneurship both significantly contribute to the improvement of national level efficiency. However, both measures would benefit from further development and it seems a higher coincidence of both is more likely to advance a nation’s economic efficiency.
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Notes
The estimated set (\(\hat {\Psi }\)) could be calculated in two assumptions: constant returns to scale (CRS) or the varied returns to scale (VRS). The assumption of CRS assumes the efficiency frontier is a straight plane, so any observations on the frontier has to be scale efficient. Unlike the CRS, the VRS do not require that the observations on the frontier have to be scale efficient. An appropriate business structure (new or young enterprises and established businesses) is critical to the long-term economic growth, so we adopt the CRS assumption. In other words, the countries could work as VRS efficient, but we wish to use the CRS frontier as the benchmark (as a socially optimal level).
We accept the rest of regularity assumptions in Simar and Wilson (2007) and the constant term is included into Z i for the regular assumption on the error term (𝜖 i ), which is distributed \(\mathnormal {\mathnormal {N}}(0,\sigma _{\epsilon }^{2})\) with truncation of left-tail at 1 − Z i α.
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We would like to acknowledge and thank the anonymous reviewers for their contribution in refining this manuscript. We also gratefully acknowledge the assistance of our affiliated institutions for the research environments provided while working on this paper. The usual disclaimer applies.
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Du, K., O’Connor, A. Entrepreneurship and advancing national level economic efficiency. Small Bus Econ 50, 91–111 (2018). https://doi.org/10.1007/s11187-017-9904-4
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DOI: https://doi.org/10.1007/s11187-017-9904-4
Keywords
- Economic efficiency
- Data envelopment analysis
- New product entrepreneurship
- Improvement-driven opportunity entrepreneurship
- Global entrepreneurship monitor