Abstract
Recent developments in entrepreneurship suggest a causal link between entrepreneurial activity and economic growth: entrepreneurship precedes economic growth. A positive effect from entrepreneurship on economic development in advanced, innovation-driven economies in the most recent decades is often maintained. Self-employment is one of the most common indicators of entrepreneurship. The present study uses very long series of non-interrupted data on self-employment in Sweden (1850–2000). It analyzes the relationship between variations in self-employment and economic growth. For the entire period, variations in self-employment had a significant, instantaneous positive correlation with GDP growth. However, no causal relationship could be discovered: variations in self-employment did not (Granger) cause GDP growth.
We discovered a structural break in GDP growth as early as in the year of 1948. Up until 1948, (Granger) causality between self-employment and GDP could not be established for any direction. For the other segment (1949–2000), GDP growth (Granger) caused self-employment growth, but not the other way around. For the period 1949–2000, but not for the previous period, self-employment lagged with respect to GDP growth. Consequently, GDP growth preceded self-employment growth, but self-employment growth did not precede GDP growth. Given that self-employment is a suitable indicator, the empirical results in this study are, in several respects, in disagreement with dominating assumptions in mainstream research.
This study is part of the research project Entrepreneurship, Innovation, and the Demography of Firms and Industries in Sweden over Two Centuries, financed by Riksbankens Jubileumsfond (P12-1122:1).
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Furthermore, over the past 200 years—and in contrast to several other countries—Sweden has not been directly affected by catastrophes, severe civil conflict, wars, or foreign occupation that may interrupt or infer statistical series.
- 2.
For instance, Schumpeter regarded the entrepreneur as an agent, or as a group of agents that introduced innovations. Schumpeter’s entrepreneurs create disequilibria, while Kirzner’s entrepreneurs are arbitrators that establish market equilibrium. For Knight, all small business owners are entrepreneurs. In disagreement with Knight, the Schumpeterian entrepreneur is not a risk taker or owner. In his late works, Schumpeter defines the entrepreneur as an economic function, while Kirzner personalizes the entrepreneurs into individuals endowed with the ability to identify opportunities that others cannot. Entrepreneurship in the Kirznerian sense does not require innovation.
- 3.
- 4.
Compendia records OECD data on business ownership from the 1970s (Van Stel 2005). GEM is survey-based and has produced shorter cross-country time series (starting in 1999) (see Bosma and Levie 2010). It has been noted that the method of harmonizing data can be somewhat simplistic and that it may produce incorrect figures (Bjuggren et al. 2010).
- 5.
For a critical view of the concept of the entrepreneurial economy, see Parker (2001).
- 6.
From a different angle, sociologists have suggested that the observed increase in self-employment from the 1970s in developed economies may be a structural response to declining opportunities for good jobs in the industrial sector rather than, as in earlier times, a cyclical response to unemployment (Steinmetz and Wright 1989; Bögenhold and Staber 1991).
- 7.
Within the framework of the GEM-project, an S-shaped model founded in Porter’s typology of factor-, efficiency-, and innovation-driven economies has evolved (Acs and Szerb 2009; Bosma et al. 2008). Related lines of thought are found in a U-shaped stage model in which entrepreneurship is high in low-income countries, lower in middle-income countries (where economies of scale increase), and high in advanced economies (Wennekers et al. 2010).
- 8.
From a visual inspection of Fig. 1 this observation seems partially reasonable. The Swedish postwar-period exhibited a very long stage of high macroeconomic growth, a time during which self-employment fell sharply. The years from the early 1970s were characterized by slower economic growth and crises. The relative take-off in self-employment in the early 1990s also corresponds to the onset of the economic depression. When the economy recovered in the second half of the last decade of the century, self-employment apparently fell again. For a description of the Swedish economy, see Schön (2010).
- 9.
This dating approach is according to the assumption that the number of breaks, m, is known. Since there exists no prior knowledge of m, we shall first determine the value of m. To determine a reasonable m, we specify different models with different possible m; for instance, we set m = 0, 1, 2, …, M. M will be determined based on the associated model that minimizes BIC.
- 10.
The immediate post-war years have been described as an economic-political ‘system crisis’ that, in principle, ended in 1948 (Lundberg 1983).
References
Acs, Z. J., & Szerb, L. (2009). The global entrepreneurship index. Jena Economic research papers, 2009–028.
Acs, Z. J., & Szerb, L. (2012). Global entrepreneurship and development index 2012. Cheltenham: Edward Elgar.
Ahmad, N., & Hoffman, A. (2008). A framework for addressing and measuring entrepreneurship. OECD Statistics working papers, 2008/02.
Audretsch, D. B., & Thurik, A. R. (1997). Sources of growth: The entrepreneurial versus the managed economy. CEPR Discussion papers, 1710.
Audretsch, D. B., & Thurik, A. R. (2000). Capitalism and democracy in the 21st century: From the managed to the entrepreneurial economy. Journal of Evolutionary Economics, 10(1–2), 17–34.
Audretsch, D. B., & Thurik, A. R. (2001). What’s new about the new economy? Sources of growth in the managed and entrepreneurial economies. Industrial and Corporate Change, 10(1), 267–315.
Bai, J., & Perron, P. (2003). Computation and analysis of multiple structural change models. Journal of Applied Econometrics, 18(1), 1–22.
Baumol, W. J. (1993). Entrepreneurship, management, and the structure of payoffs. Cambridge, MA: MIT Press.
Bjuggren, C. M., Johansson, D., & Stenkula, M. (2010). Using self-employment as proxy for entrepreneurship: Some empirical caveats. IFN Working paper, No. 845.
Blanchflower, D. G. (2000). Self-employment in OECD countries. Labour Economics, 7(September), 471–505.
Blau, D. M. (1987). A time-series analysis of self-employment in the United States. Journal of Political Economy, 95(3), 445–467.
Bögenhold, D., & Staber, U. (1991). The decline and rise of self-employment. Work, Employment and Society, 5(2), 223–239.
Bosma, N., Acs, Z. J., Erkko, A., Coduras, A., & Levie, J. (2008). Global entrepreneurship monitor 2008 executive report. London/Babson Park, MA: London Business School/Babson College.
Bosma, N., & Levie, J. (2010). Global entrepreneurship monitor 2009 executive report. London/Babson Park, MA: London Business School/Babson College.
Braunerhjelm, P., Acs, Z. J., Audretsch, D. B., & Carlsson, B. (2010). The missing link: Knowledge diffusion and entrepreneurship in endogenous growth. Small Business Economics, 34(2), 105–125.
Breitung, J., & Candelon, B. (2006). Testing for short- and long-run causality: A frequency-domain approach. Journal of Econometrics, 132(2), 363–378.
Bruce, D., & Mohsin, M. (2006). Tax policy and entrepreneurship: New time series evidence. Small Business Economics, 26(5), 409–425.
Carree, M., & Thurik, A. R. (2008). The lag structure of the impact of business ownership on economic performance in OECD countries. Small Business Economics, 30(1), 101–110.
Carree, M., & Thurik, R. (2010). The impact of entrepreneurship on economic growth. In Z. J. Acz & D. B. Audretsch (Eds.), Handbook of entrepreneurship research. Berlin: Springer.
Carree, M., Van Stel, A., Thurik, R., & Wennekers, S. (2002). Economic development and business ownership: An analysis using data of 23 OECD countries in the period 1976–1996. Small Business Economics, 19(3), 271–290.
Carree, M., van Stel, A., Thurik, R., & Wennekers, S. (2007). The relationship between economic development and business ownership revisited. Entrepreneurship and Regional Development, 19(May), 281–291.
Casson, M. (1982). The entrepreneur. An economic theory. Oxford: Martin Robertson.
Congregado, E., Golpe, A. A., & Parker, S. C. (2012). The dynamics of entrepreneurship: Hysteresis, business cycles and government policy. Empirical Economics, 43(3), 1239–1261.
Edvinsson, R. (2005). Growth, accumulation, crisis: With new macroeconomic data for Sweden 1800–2000. Stockholm: Almqvist & Wiksell International.
Elliott, G., Rothenbert, T. J., & Stoch, J. H. (1996). Efficient tests for an autoregressive unit root. Econometrica, 64(4), 813–836.
Fölster, S. (2001). Do lower taxes stimulate self-employment? Small Business Economics, 19(2), 134–145.
Geweke, J. (1982). Measurement of linear dependence and feedback between multiple time series. Journal of the American Statistical Association, 77(378), 304–324.
Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 37(3), 424–438.
Hartog, C., Parker, S., van Stel, A., & Thurik, R. (2010). The two-way relationship between entrepreneurship and economic performance (Scales report H200822).
Henrekson, M., & Stenkula, M. (2007). Entreprenörskap. Stockholm: SNS.
Hosoya, Y. (1991). The decomposition and measurement of the interdependence between second-order stationary process. Probability Theory and Related Fields, 88(4), 429–444.
Jonung, L. (2000). Från guldmyntfot till inflationsmål—svensk stabiliseringspolitik under det 20:e seklet. Ekonomisk debatt, 28(1), 17–32.
Kirzner, I. (1973). Competition and entrepreneurship. Chicago: University of Chicago Press.
Kirzner, I. (1999). Creativity and/or alertness: A reconsideration of the Schumpeterian entrepreneur. Review of Austrian Economics, 11(1–2), 5–17.
Knight, F. H. (1921). Risk, uncertainty and profit. Boston: Houghton Mifflin.
Koellinger, P. D., & Thurik, A. R. (2012). Entrepreneurship and the business cycle. The Review of Economics and Statistics, 94(4), 1143–1156.
Landström, H., & Lohrke, F. (2010). Historical foundations of entrepreneurship research. Cheltenham: Edward Elgar.
Lindh, T., & Ohlsson, H. (1998). Self-employment and wealth inequality. Review of Income and Wealth, 44(1), 25–41.
Lunati, M., Meyer zu Schlochtern, J., & Sargsyan, G. (2010, November). Measuring entrepreneurship. The OECD-Eurostat Entrepreneurship Indicators Programme. OECD Statistics brief, No. 15.
Lundberg, E. (1983/1994). Ekonomiska kriser förr och nu. 2. uppl. Stockholm: SNS.
Lundström, A., & Sundin, E. (2008). Perspektiv på förnyelse och entreprenörskap offentlig verksamhet. Örebro: Forum för småföretagsforskning.
Parker, R. (2001). The myth of the entrepreneurial economy. Work, Employment & Society, 15(2), 239–253.
Parker, S. C., Congregado, E., & Golpe, A. A. (2012). Is entrepreneurship a leading or lagging indicator of the business cycle? Evidence from UK self-employment data. International Small Business Journal, 30(7), 736–753.
Say, J. B. (1816). Catechism of political economy. London: Sherwood, Neely and Jones.
Schön, L. (2010). Sweden’s road to modernity: an economic history. Stockholm: SNS.
Schumpeter, J. A. (1911). Theorie der wirtschaftlichen Entwicklung. Leipzig: Dunker & Humblot.
Shane, S. (1996). Explaining variation in rates of entrepreneurship in the United States: 1899-1988. Journal of Management, 22(5), 747–781.
Shane, S. (2003). A general theory of entrepreneurship: the individual-opportunity Nexus. Cheltenham: Edward Elgar.
Staber, U., & Bögenhold, D. (1993). Self-employment: A study of seventeen OECD-countries. Industrial Relations Journal, 24(2), 126–137.
Steinmetz, G., & Wright, E. O. (1989). The fall and rise of the petty bourgeoisie: Changing patterns of self-employment in the postwar United States. American Journal of Sociology, 94(5), 973–1018.
Stenkula, M. (2012). Taxation and entrepreneurship in a welfare state. Small Business Economics, 39(1), 77–97.
Thessensohn, T. L., & Thurik, R. (2012). The relationship between different kinds of nascent entrepreneurship and the business cycle. In P. Braunerhjelm (Ed.), Entrepreneurship, norms and the business cycle: Swedish economic forum report. Stockholm: Swedish Economic Forum.
Thurik, R., & Wennekers, S. (2004). Entrepreneurship, small business and economic growth. Journal of Small Business and Enterprise Development, 11(1), 140–149.
Van Stel, A. (2005). COMPENDIA: Harmonizing business ownership data across countries and over time. International Entrepreneurship and Management Journal, 1(1), 105–123.
Van Stel, A., Carree, M., & Thurik, R. (2005). The effect of entrepreneurial activity on national economic growth. Small Business Economics, 24(3), 311–321.
Wennekers, S., & Thurik, R. (1999). Linking entrepreneurship and economic growth. Small Business Economics, 13(1), 27–55.
Wennekers, S., van Stel, A., Carree, M., & Thurik, R. (2010). The relationship between entrepreneurship and economic development: Is it U-shaped? SCALES, EIM research reports, H200824.
Wennekers, S., van Stel, A., Thurik, R., & Reynolds, P. (2005). Nascent entrepreneurship and the level of economic development. Small Business Economics, 24(3), 293–309.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2016 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Box, M., Lin, X., Gratzer, K. (2016). Linking Entrepreneurship and Economic Growth in Sweden, 1850–2000. In: Bögenhold, D., Bonnet, J., Dejardin, M., Garcia Pérez de Lema, D. (eds) Contemporary Entrepreneurship. Springer, Cham. https://doi.org/10.1007/978-3-319-28134-6_3
Download citation
DOI: https://doi.org/10.1007/978-3-319-28134-6_3
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-28132-2
Online ISBN: 978-3-319-28134-6
eBook Packages: Business and ManagementBusiness and Management (R0)