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Longitudinal analysis of entrepreneurship and competitiveness dynamics in Latin America

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Abstract

This study analyzes the relationship between entrepreneurial dynamics in Latin-American countries and the level of competitiveness these countries show. Based on the research conducted by Wennekers et al. [Small Business Economics, 24(3):293–309, 2005] that demonstrates a U-shaped relationship between the country’s rate of entrepreneurship and its level of competitiveness and economic development, we hypothesize that Latin-American countries have a descending behaviour under the U-shaped curve approach. The results from three regression models support this hypothesis and suggest that competitiveness and economic growth deter entrepreneurial dynamics on Latin-American countries. We discuss that Latin-American countries need to improve some structural factors to achieve a high level of entrepreneurial dynamics.

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Notes

  1. Cantillon is considered the first economical theorist. His reputation is based on his work Essai Sur la Nature du Commerce en Général.

  2. Catechism of Political Economy, 1815.

  3. It is possible to distinguish between the static and dynamic perspectives of entrepreneurship. The static perspective refers to the number of business-owners as a dimension of the industrial structure of the economy. The dynamic perspective refers to the gross changes on the entrepreneurship rate (Wennekers et al. 2005, p. 295).

  4. For the methodological design and implementation of the GEM project see Reynolds et al. (2005).

  5. For dynamic enterprise both GEM (2005, 2006) and Kantis et al. (2004) considered those companies that have or will have a sustainable growth on selling rates and employment.

  6. There exist diverse economic, institutional and demographic factors that influence the economic growth and could be related to the entrepreneurial activity. See Wennekers et al. (2005), p. 298.

  7. For the complete GEM project measurements see Reynolds et al. (2005). and for recent changes on GEM see Minniti et al. (2006).

  8. In the GCR 2005–2006 the World Economic Forum introduced a new and more comprehensive competitiveness index: the Global Competitiveness Index (Global CI). This new index evaluates and benchmarks many critical factors, which were absent from the GCI. The Global CI aims to measure “the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity” (Sala-i-Martin and Artadi 2004, p. 52). The Global CI was developed by Word Economic Forum’s Global Competitiveness Programme and Professor Xavier Sala-i-Martin, a leading expert on the process of economic growth at Columbia University. The Global CI is built with “nine pillars”, each of which is critical to driving productivity and competitiveness in national economies. The Global CI uses Porter’s competitiveness stages to determine three sub-indexes based on the nine pillars: Basic requirements subindex (Stage 1: factor-driven): Institutions (pillar 1). Infrastructure (pillar 2). Macroeconomic (pillar 3). Health and basic education (pillar 4). Efficiency enhancers subindex (Stage 2: efficiency-driven): Higher education and training (pillar 5). Market efficiency (pillar 6). Technological readiness (pillar 7). Innovation and sophistication factor subindex (Stage 3: innovation-driven): Business sophistication (pillar 8). Innovation (pillar 9). A brief description on the construction of the index is provided in Chapter 1.1 (see Appendix B and Appendix C) of GCR 2005–2006 (López-Claros et al. 2005, pp. 40–42). With these concepts Global CI uses the model of developmental stages by weighing each of the sub-indexes differently, depending on the stage a given country is in. Latin American and Caribbean countries are weighed on basic requirements and efficiency enhancers. To maintain the homogeneity we only use GCI on 2005 measures, but performed additional analysis using Global CI as a supplementary competitiveness measure, with no significant variations.

  9. GDP is a better measure of the state of production in the short term, and is closer to entrepreneurial dynamics than the Gross National Income which is better when analyzing sources and uses of income, including profits from capital held abroad.

  10. Available online at http://www.imf.org/external/pubs/ft/weo/2006/01/data/index.htm.

  11. GEM’s methodology defines high-expectation entrepreneurship as the early-stage business that expects to employ at least 20 employees within 5 years time.

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Acknowledgment

The authors are grateful to the Global Entrepreneurship Monitor Consortium (GEM), to the researchers and sponsors who have made this project possible. We also are thankful to André Van Stel for their interesting comments on an earlier version of this paper and Massiel Guerra and José Ma Veciana for their help on statistics estimations. An earlier version of this paper was presented at the AGSE International Entrepreneurship Research Exchange 2007.

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Authors and Affiliations

  1. Entrepreneurship and Innovation Center, Universidad del Desarrollo, Av. La Plaza 700. Las Condes, 761-0658, Santiago, Chile

    José Ernesto Amorós

  2. ESADE Business School, Universitat Ramon Llull, Barcelona, Spain

    José Ernesto Amorós

  3. Business Research Center, Universidad del Desarrollo, Av. La Plaza 700. Las Condes, 761-0658, Santiago, Chile

    Oscar Cristi

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  1. José Ernesto Amorós
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Correspondence to José Ernesto Amorós.

Appendix: Participant Countries in GEM 2000–2006

Appendix: Participant Countries in GEM 2000–2006

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Amorós, J.E., Cristi, O. Longitudinal analysis of entrepreneurship and competitiveness dynamics in Latin America. Int Entrep Manage J 4, 381–399 (2008). https://doi.org/10.1007/s11365-008-0082-3

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