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Entrepreneurship in the EU: survey Entrepreneurship in the EU: survey evidence at country levelevidence at country level
Isabel GriloEuropean Commission (DG Enterprise and Industry), Université catholique de
Louvain (CORE)
Instituto de Estadistica de Andalucia/Universidad de Huelva‘2nd workshop on entrepreneurship statistics’
17-18 November 2008, Hotel El Rompido-Golf, Huelva
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I will talk aboutI will talk about
• Eurobarometer
• Spain
• An example using the Eurbarometer 2004: Grilo, Thurik and van der Zwan, (Applied Economics, 2008)
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The seven entrepreneurial The seven entrepreneurial engagement levelsengagement levels
Have you started a business recently or are you taking steps to start one? “It never came to your mind"“No, you thought of it or had already taken steps to start a business but gave up"“No, but you are thinking about it"“Yes, you are currently taking steps to start a new business"“Yes, you have started or taken over a business in the last 3 years and still active"“Yes, you started or took over a business more than 3 years ago and still active" “No, you once started a business, but currently you are no longer an entrepreneur"
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Actual and Actual and never considerednever considered(Eurobarometer)(Eurobarometer)
0,00
0,10
0,20
0,30
0,40
0,50
0,60
0,70
Latv
iaS
love
nia
Mal
taLi
thua
nia
Luxe
mb
ourg
Fran
ceE
sto
nia
Den
mar
kS
pain
Ger
man
yP
ortu
gal
Sw
eden
Italy
Hun
gary
Nor
way
Uni
ted
Kin
gdo
mA
ustr
iaB
elg
ium
Fin
land
Net
herl
ands
Pol
and
Slo
vaki
aC
zech
Rep
ublic
Uni
ted
Sta
tes
Liec
hten
stei
nIc
elan
dC
ypru
sIr
elan
dG
reec
e
5
Many covariates includingMany covariates including
• Latent entrepreneurship
• Perception of administrative complexities
• Risk tolerance
• Perception of lack of sufficient information
• Perception of lack of financial support
• Demographics
• etc
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0,00
0,10
0,20
0,30
0,40
0,50
0,60
0,70
Latv
iaS
love
nia
Mal
taLi
thua
nia
Luxe
mb
ourg
Fran
ceE
sto
nia
Den
mar
kS
pain
Ger
man
yP
ortu
gal
Sw
eden
Italy
Hun
gary
Nor
way
Uni
ted
Kin
gdo
mA
ustr
iaB
elg
ium
Fin
land
Net
herl
ands
Pol
and
Slo
vaki
aC
zech
Rep
ublic
Uni
ted
Sta
tes
Liec
hten
stei
nIc
elan
dC
ypru
sIr
elan
dG
reec
e
Actual and Actual and latentlatent entrepreneurship 2004 entrepreneurship 2004 (Eurobarometer)(Eurobarometer)
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Perception of administrative complexitiesPerception of administrative complexities(Eurobarometer)(Eurobarometer)
0,40
0,50
0,60
0,70
0,80
0,90
1,00
Lie
chte
nst
ein
Icel
and
Uni
ted
Sta
tes
Aus
tria
Mal
taF
inla
nd
Net
her
lan
dsC
ypru
s
Uni
ted
Kin
gdo
mL
uxe
mbo
urg
Irel
and
Ger
man
yS
wed
enE
sto
nia
Pol
and
Cze
ch R
epub
licG
reec
eB
elg
ium
Spa
inF
ran
ceN
orw
ayIt
aly
Den
mar
kH
ung
ary
Lat
via
Slo
vaki
aP
ortu
gal
Slo
veni
aL
ithu
ania
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Risk toleranceRisk tolerance(Eurobarometer)(Eurobarometer)
0,10
0,20
0,30
0,40
0,50
0,60
0,70
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Perception of lack of sufficient informationPerception of lack of sufficient information(Eurobarometer)(Eurobarometer)
0,200,250,300,350,400,450,500,550,600,650,70
Fin
land
Net
herl
ands
Slo
vaki
aS
love
nia
Cze
ch R
epub
licS
wed
enN
orw
ayB
elg
ium
Den
mar
kA
ustr
iaU
nite
d K
ingd
om
Ger
man
yE
sto
nia
Fran
ceLa
tvia
Mal
taH
unga
ryLu
xem
bou
rgLi
echt
enst
ein
Gre
ece
Pol
and
Italy
Lith
uani
aIr
elan
dS
pain
Uni
ted
Sta
tes
Cyp
rus
Icel
and
Por
tuga
l
10
Perception of lack of financial supportPerception of lack of financial support(Eurobarometer)(Eurobarometer)
0,40
0,50
0,60
0,70
0,80
0,90
1,00
Fin
lan
dN
eth
erla
nds
Icel
and
Nor
way
Den
mar
k
Uni
ted
Kin
gdo
mIr
elan
dU
nite
d S
tate
sL
iech
ten
stei
nA
ustr
iaG
erm
any
Sw
eden
Bel
giu
mE
sto
nia
Cze
ch R
epub
licL
uxe
mbo
urg
Spa
inM
alta
Fra
nce
Cyp
rus
Por
tug
alIt
aly
Slo
veni
aP
olan
dH
ung
ary
Lit
huan
iaG
reec
eL
atvi
aS
lova
kia
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Research program of DG enterprise Research program of DG enterprise jointly with EURjointly with EUR
• Multilevel• Actual versus latent• Seven engagement levels• Topics
– Two basic models– Developments over time– Eastern versus Western Europe versus US– Women– Dropouts– Necessity versus opportunity– Method and statistics
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What do we do?What do we do?
• different engagement levels 7
• individual data 20,000
• multi-level 26
• eclectic flavor 8 of more
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Determinants of entrepreneurshipDeterminants of entrepreneurship
• three giants (Schumpeter, Kirzner, Knight)
• economic theory (income choice)
• empirical literature
• our set-up
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Theory of income choiceTheory of income choice
• Ability - entrepreneurial efficiency– Jovanovic, 1982 and 1994; Lucas, 1978; Murphy, Shleifer and Vishny,
1991; Holmes and Schmitz, 1990 and Lazear, 2004
• Risk - risk attitudes– Kihlstrom and Laffont, 1979 and Parker, 1996 and 1997
• Liquidity constraints - polymorphe– Lucas, 1978; Jovanovic, 1982; Evans and Jovanovic, 1989 and Hurst and
Lusardi, 2004
• Eclectic add-ons– Bates, 1990; Blanchflower, 2004; Blanchflower and Meyer, 1994;
Blanchflower and Oswald, 1998; Blau, 1987; Douglas and Shepherd, 2002; Evans and Leighton, 1989 and 1990; Grilo and Irigoyen, 2005; Grilo and Thurik, 2005; Lin, Picot and Compton, 2000; Rees and Shah, 1986; Reynolds, 1997; Wagner, 2003 and Wit and van Winden, 1989
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Empirical literatureEmpirical literature
• gender, age, educational attainment• financial situation• employment status• experience• minority, immigrant behavior• family firm effects• attitudes• perceptions
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Empirical literatureEmpirical literature
• gender, age, educational attainment• financial situation• employment status• experience• minority, immigrant behavior• family firm effects• attitudes (preference; risk tolerance)• perceptions (adm. complexity; financial constraints)
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An example using Eurobarometer 2004An example using Eurobarometer 2004Van der Zwan, Grilo, Thurik (Applied Economics, 2008)Van der Zwan, Grilo, Thurik (Applied Economics, 2008)
• Aim– Disentangle the role of demographic and perception variables
and of country specific effects given that the entrepreneurial decision is a process of successive engagement levels
• Explaining the entrepreneurial ladder– 5 engagement levels
– 12,000 observations
– 26 countries
– 12 exogenous variables
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Entrepreneurship is a processEntrepreneurship is a process
• entrepreneurial ladder– steps: conception; gestation; infancy; adolescence; maturity;
decline
– one can jump or fall off– most don’t climb– climbing entails risks– the higher the more visible– one can climb down or climb again– the ladder industry is heavily regulated
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The seven entrepreneurial The seven entrepreneurial engagement levelsengagement levels
Have you started a business recently or are you taking steps to start one? “It never came to your mind"“No, you thought of it or had already taken steps to start a business but gave up"“No, but you are thinking about it"“Yes, you are currently taking steps to start a new business"“Yes, you have started or taken over a business in the last 3 years and still active"“Yes, you started or took over a business more than 3 years ago and still active" “No, you once started a business, but currently you are no longer an entrepreneur"
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The five entrepreneurial The five entrepreneurial engagement levelsengagement levels
Have you started a business recently or are you taking steps to start one? “It never came to your mind"“No, you thought of it or had already taken steps to start a business but gave up"“No, but you are thinking about it"“Yes, you are currently taking steps to start a new business"“Yes, you have started or taken over a business in the last 3 years and still active"“Yes, you started or took over a business more than 3 years ago and still active" “No, you once started a business, but currently you are no longer an entrepreneur"
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Ordered logit modelOrdered logit model
• yi* = Xi’β+ εi • yi* : unobserved propensity to become
entrepreneur• εi : uncorrelated, logistic distribution, zero mean
and variance π2/3 • Xi : vector of covariates, • Same β across observations i and engagement
levels
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Model evaluationModel evaluation
• Heteroskedastic disturbance terms: variance of • Parallel regression assumption (PRA)• Violation: impacts of variables change with
increasing level of engagement• Heteroskedasticity PRA
i
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Results (height of the steps)Results (height of the steps)
• Thinking taking steps: ‘difficult’
• Taking steps young business: ‘easy’
Implication: support for the TEA concept (GEM)
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Results (impact of covariates on Results (impact of covariates on engagement ladder)engagement ladder)
• Gender (men): ‘helps’ move up• Education: ‘helps’ move up• Self-employed parents: ‘helps’ move up• Risk tolerance: ‘helps’ move up• Preference for SE: ‘helps’ move up (strong)• Age: ‘helps’ move up iff ‘young enough’• Locus of control: no effect• Perception financial support: no effect• Perception administrative burden: ‘hinders’ move up• Spain, (Portugal, France, Belgium): ‘hinders’ move up
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Selected policy messagesSelected policy messages
• Results on age + aging society: urgency !!
• Administrative complexities: cut red tape and let them climb !!
• Think twice before spending tax payers’ money