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Entrepreneurship and Economic Growth

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Abstract

We study the impact of entrepreneurship on economic growth. To do so, we analyze whether entrepreneurial activity (based on data from the Global Entrepreneurship Monitor, GEM) affect the economic activity in a given country (as measured by the Gross Domestic Product, GDP). A key methodological contribution of this paper is that the relationship between entrepreneurial activity and GDP growth considers that a relevant part of economic growth is explained by exogenous variables. For this reason, the empirical analysis is based on data on South American Countries, where external factors are more relevant to drive GDP. We found that for the countries analyzed there is a positive and significant relationship between intrapreneurial activity and economic growth.

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Notes

  1. In this calculation, only the countries that were later modelled were included, these are the following: Argentina, Brazil, Chile, Colombia, Ecuador, Peru, and Uruguay. All data is extracted from The World Bank.

  2. These concepts are developed in Chapters 2 and 7. Chapter 7 was eliminated after the first edition.

  3. According to the GEM, a “high impact entrepreneur” is one that meets the following criteria: (1) proposes to employ at least 20 people in the next 5 years, (2) has already had some impact of market growth, (3) at least 25% of clients live abroad, and (4) the technologies employed by the enterprise have not been widely available more than a year ago.

  4. A simple average instead of a weighted average was used to avoid the overrepresentation of the biggest countries.

  5. Details of each individual model are found in the Appendix; this included unit root test for each variable, the cointegration tests, lag tests and vector error correction (VEC) estimates. See Johansen (1988) for the details of the methodology.

  6. The sources were Orlando J. Ferreres & Asociados for Argentina, the Central Bank of Bolivia, The Central Bank of Brazil, The Central Bank of Chile, The Republic Bank of Colombia, The Central Bank of Ecuador, The Central Bank of Paraguay, The Central Bank of Reserve of Peru, and The Central Bank of Uruguay. The sources for the independent variables are The World Bank and The Federal Reserve Economic Data (St. Louis Fed).

  7. Official GEM variable name is BJOBST: The percentage of the adult population aged 18–64 years who, alone or with others, are trying to start a new business or a new venture with their employers—an effort that is part of their normal work.

  8. Official GEM variable name: TEA: Entrepreneurial Activity (TEA) Rate: Percentage of 18–64 population who are either a Nascent entrepreneur or Baby Business Manager.

  9. Official GEM variable name: BABYBU: The percentage of the adult population aged 18–64 years who are owner-managers of a new, entrepreneurial firm who started less than 42 months old before the survey took place.

  10. Official GEM variable name: SUBOAN: The percentage of the adult population aged 18–64 years who are in the process of starting a business.

  11. GEM variable: TEA-TEANEC.

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Acknowledgements

We thank seminar participants at IEEM Business School of University of Montevideo for useful comments. Erika Chabén and Ana Vignolo provided excellent research assistance.

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  1. IEEM Business School, University of Montevideo, Lord Ponsonby 2542, Montevideo, Uruguay

    Ignacio Munyo & Leonardo Veiga

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  1. Ignacio Munyo
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Correspondence to Ignacio Munyo.

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Munyo, I., Veiga, L. Entrepreneurship and Economic Growth. J Knowl Econ (2022). https://doi.org/10.1007/s13132-022-01032-8

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