Small Business Economics

, Volume 24, Issue 3, pp 335–350 | Cite as

Entrepreneurship, Innovation and Economic Growth: Evidence from GEM data

  • Poh Kam WongEmail author
  • Yuen Ping Ho
  • Erkko Autio


Studies on the impact of technological innovation on growth have been largely mute on the role of␣new firm formation. Using cross-sectional data on the 37 countries participating in GEM 2002, this paper uses an augmented Cobb–Douglas production to explore firm formation and technological innovation as separate determinants of growth. One area of interest is the contrast between different types of entrepreneurial activities as measured using GEM Total Entrepreneurial Activity (TEA) rates – high growth potential TEA, necessity TEA, opportunity TEA and overall TEA. Of the four types of entrepreneurship, only high growth potential entrepreneurship is found to have a significant impact on economic growth. This finding is consistent with extant findings in the literature that it is fast growing new firms, not new firms in general, that accounted for most of the new job creation by small and medium enterprises in advanced countries.


entrepreneurship economic growth 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Aghion, P., Howitt, P. 1992A Model of Growth through Creative DestructionEconometrica60323351Google Scholar
  2. Audretsch, D. B. 1995Innovation and Industry EvolutionMIT PressCambridge, MAGoogle Scholar
  3. Audretsch, D. B., M. A. Carree and R. Thurik, 2001, ‘Does Entrepreneurship Reduce Unemployment?’, Discussion paper TI01-074/3, Tinbergen Institute, Erasmus University Rotterdam.Google Scholar
  4. Audretsch, D. B., Carree, M. A., Stel, A. J. ., Thurik, R. 2002Impeded Industrial Restructuring: The Growth PenaltyKyklos558197Google Scholar
  5. Audretsch, D. B., Thurik, R. 2000Capitalism and Democracy in the 21st Century: From the Managed to the Entrepreneurial EconomyJournal of Evolutionary Economics101734Google Scholar
  6. Autio, E., P.-K. Wong and P. D. Reynolds, 2003, ‘National Factors Influencing the Prevalence of “High-Potential” Start-Ups’, NUS Entrepreneurship Centre Research Working Paper.Google Scholar
  7. Baldwin, J., Picot, G. 1995Employment Generation by Small Producers in the Canadian Manufacturing SectorSmall Business Economics7317331Google Scholar
  8. Barro, R. J. 1991Economic Growth in a Cross Section of CountriesQuarterly Journal of Economics106407443Google Scholar
  9. Baumol, WJ. 1993Entrepreneurship, Management and the Structure of PayoffsMIT PressCambridge, MAGoogle Scholar
  10. >Birch, D., 1979, The Job Generation Process, Final Report to Economic Development Administration, Cambridge, MA: MIT Program on Neighbourhood and Regional Change.Google Scholar
  11. Birch, D. 1987Job Creation in America: How our Smallest Companies Put the Most People to WorkThe Free PressNew YorkGoogle Scholar
  12. Birch, DA., Haggerty, A., Parsons, W. 1997Who’s Creating Jobs?CogneticsCambridge, MAGoogle Scholar
  13. Carree, M. A., Stel, A. J. ., Thurik, R., Wennekers, S. 2002Economic Development and Business Ownership: An Analysis using Data of 23 OECD Countries in the Period 1976–1996Small Business Economics19271290Google Scholar
  14. Carree, MA., Thurik, R. 2003‘The Impact of Entrepreneurship on Economic Growth’Acs, J. eds. Handbook of Entrepreneurship ResearchKluwer-Academic PublishersBoston/DordrechtGoogle Scholar
  15. Cipolla, CM. 1981Before the Industrial Revolution: European Society and Economy, 1000–17002Cambridge, UKCambridge University PressGoogle Scholar
  16. Coe, D., Helpman, E. 1995International R&D SpilloversEuropean Economic Review39859887Google Scholar
  17. Davidsson, P., 2003, ‘The Domain of Entrepreneurship Research: Some Suggestions’, in Jerome A. Katz and Dean Shepherd (eds.), Cognitive Approaches to Entrepreneurship Research, Advances in Entrepreneurship, Firm Emergence and Growth 6, pp. 315–372.Google Scholar
  18. Davidsson, P., Delmar, F. 2003Hunting for New Employment: The Role of High Growth FirmsKirby, D.A.Watson, A. eds. Small Firms and Economic Development in Developed and Transition Economies: A ReaderAshgate PublishingHampshireGoogle Scholar
  19. Davidsson, P., Lindmark, L., Olofsson, C. 1995Small Firms, Business Dynamics and Differential Development of Economic Well-BeingSmall Business Economics7301315Google Scholar
  20. Davidsson, P., Lindmark, L., Olofsson, C. 1998‘Smallness, Newness and Regional Development’Swedish Journal of Agricultural Research285771Google Scholar
  21. Engelbrecht, H.-J. 1997International R&D Spillovers amongst OECD EconomiesApplied Economics Letters4315319Google Scholar
  22. Evans, D. S., Leighton, L. S. 1989The Determinants of Changes in U.S. Self-EmploymentSmall Business Economics1111120Google Scholar
  23. Evans, D. S., Leighton, L. S. 1990Small Business Formation by Unemployed and Employed WorkersSmall Business Economics2319330Google Scholar
  24. Fritsch, M., Mueller, P. 2004Effects of New Business Formation on Regional Development over TimeRegional Studies38961975Google Scholar
  25. Griliches, Z. 1990Patent Statistics as Economic Indicators: A SurveyJournal of Economic Literature2816611707Google Scholar
  26. Grossman, GM., Helpman, E. 1991Innovation and Growth in the Global EconomyMIT PressCambridge, MAGoogle Scholar
  27. Guellec, D. and B. van Pottelsberghe de la Potterie, 2001, ‘R&D and Productivity Growth: Panel Data Analysis of 16 OECD Countries’, STI Working Paper 2001/3, Directorate for Science, Technology and Industry, OECD, Geneva.Google Scholar
  28. Harrison, B. 1994The Small Firm MythCalifornia Management Review36142158Google Scholar
  29. Jovanovic, B. 1982 and 1994‘Entrepreneurial Choice When People Differ in their Management and Labor Skills’Small Business Economics6185192Google Scholar
  30. Kirchoff, BA. 1994Entrepreneurship and Dynamic CapitalismPraegerWestport, CTGoogle Scholar
  31. Kirzner, IM. 1973Competition and EntrepreneurshipUniversity of Chicago PressChicagoGoogle Scholar
  32. Lazonick, W. 1991Business Organization and the Myth of the Market EconomyCambridge University PressCambridge, UKGoogle Scholar
  33. Lichtenberg, F. R., 1993, ‘R&D Investment and International Productivity Differences’, Working Paper No. 4161, National Bureau of Economic Research.Google Scholar
  34. Lucas, R. E. 1978On the Size Distribution of Business FirmsBell Journal of Economics9508523Google Scholar
  35. Lumpkin, T., Dess, G. G. 1996Clarifying the Entrepreneurial Orientation Construct and Linking it to PerformanceAcademy of Management Review21135172Google Scholar
  36. Mansfield, E., 1972, ‘Contribution of Research and Development to Economic Growth of the United States’, Papers and Proceedings of a Colloquim on Research and Development and Economic Growth Productivity, National Science Foundation, Washington, DC.Google Scholar
  37. Nadiri, I., 1993, ‘Innovations and Technological Spillovers’, Working Paper 423, National Bureau of Economic Research, Cambridge, MA.Google Scholar
  38. Picot, G., M. Manser and Z. Lin, 1998, ‘The Role of Self-Employment in Job Creation In Canada and the U.S’., OECD-CERF-CILN International Conference on Self-Employment, Burlington, Ontario, Canada.Google Scholar
  39. Porter, M. 1990The Comparative Advantage of NationsFree PressNew YorkGoogle Scholar
  40. Reynolds, P. D. 1999Creative Destruction: Source or Symptom of Economic Growth?Acs, Zoltan J.Carlsson, Bo.Karlsson, Charlie. eds. Entrepreneurship, Small and Medium-Sized Enterprises and the MacroeconomyCambridge University PressCanmbridgeGoogle Scholar
  41. Reynolds, P. D., M. Hay and S. Michael Camp, 1999, GEM Global 1999 Executive Report, Kansas City: Kaufman Center.Google Scholar
  42. Reynolds, P. D., M. Hay, W. D. Bygrave, S. Michael Camp and E. Autio, 2000, Global Entrepreneurship Monitor: 2000 Executive Report, Kaufman Centre for Entrepreneurial Leadership at the Ewing Marion Kaufman Foundation.Google Scholar
  43. Reynolds, P. D., S. Michael Camp, W. D. Bygrave, E. Autio, and M. Hay, 2001, Global Entrepreneurship Monitor Global 2001 Executive Report, Kansas City: Kaufman Center.Google Scholar
  44. Reynolds, P. D., S. Michael Camp, W. D. Bygrave, E. Autio and M. Hay, 2002, Global Entrepreneurship Monitor Global 2002 Executive Report, Kansas City: Kaufman Center.Google Scholar
  45. Reynolds, P. D., Storey, D. J., Westhead, P. 1994Cross-National Comparisons of the Variation in New Firm Formation RatesRegional Studies28443456Google Scholar
  46. Romer, P. M. 1986Increasing Returns and Long Run GrowthJournal of Political Economy9410021037Google Scholar
  47. Romer, P. M. 1990Endogenous Technological ChangeJournal of Political Economy98S71S102Google Scholar
  48. Ruttan, V. W. 1997Induced Innovation, Evolutionary Theory and Path Dependence: Sources of Technical ChangeEconomic Journal10715201529Google Scholar
  49. Schmitz, J. A. 1989Imitation, Entrepreneurship, and Long-Run GrowthJournal of Political Economy97721739Google Scholar
  50. Schumpeter, J. A., 1911, Theorie der wirtschaftlichen Entwicklung. Eine Untersuchung ueber Unternehmergewinn, Kapital, Kredit, Zins und den Konjunkturzyklus, Berlin: Duncker und Humblot; translated by Redvers Opie, 1934 & 1963, The Theory of Economic Development: an Inquiry into Profits, capital, credit, Interest and the Business Cycle, Oxford: Oxford university Press.Google Scholar
  51. Schumpeter, JA. 1942Capitalism, Socialism and DemocracyHarper and RowNew YorkGoogle Scholar
  52. Solow, R. M. 1956A Contribution to the Theory of Economic GrowthQuarterly Journal of Economics706594Google Scholar
  53. Storey, D. J. 1991The Birth of New Firms–Does Unemployment Matter? A Review of the EvidenceSmall Business Economics3167178Google Scholar
  54. Storey, DJ. 1994Understanding the Small Business SectorRoutledgeLondon, UKGoogle Scholar
  55. Thurik, R., Wennekers, S. 2004Entrepreneurship, Small Business and Economic GrowthJournal of Small Business and Enterprise Development11140149Google Scholar
  56. Van Stel, A. J., 2003, ‘COMPENDIA 2000.2: A Harmonized Data Set of Business Ownership Rates in 23 OECD Countries’, EIM Research Report H200302, Zoetermeer, NL: EIM.Google Scholar
  57. Stel, AJ., Storey, DJ. 2004‘The Link between Firm Births and Job Creation: Is there a Upas Tree Effect?’Regional Studies38893909Google Scholar
  58. Van Stel, A. J., M. A. Carree and R. Thurik, 2004, ‘The Effect of Entrepreneurship on National Economic Growth: An Analysis using the GEM Database’, Small Business Economics, this issue.Google Scholar
  59. Verspagen, B. 1992Endogenous Innovation in Neo-Classical Growth Models: A SurveyJournal of Macroeconomics14631662Google Scholar
  60. Weiss, L. W. 1976Optimal Plant Scale and the Extent of Suboptimal CapacityMasson, R. T.David Qualls, P. . eds. Essays on Industrial Organization in Honor of Joe S. BainBallingerCambridge, MassGoogle Scholar
  61. Wennekers, S., Thurik, R. 1999Linking Entrepreneurship and Economic GrowthSmall Business Economics132755Google Scholar
  62. Westhead, P., Cowling, M. 1995Employment Change in Independent Owner-Managed High-Technology Firms in Great BritainSmall Business Economics7111140Google Scholar

Copyright information

© Springer 2005

Authors and Affiliations

  1. 1.Enterpreneurship CentreNational University of SingaporeSingapore
  2. 2.Enterpreneurship CentreNational University of SingaporeSingapore
  3. 3.Institute of Strategy and International BusinessHelsinki University of TechnologyEspooFinland

Personalised recommendations