The relationship among entrepreneurial activity, business cycles and economic openness

  • Gerard Scholman
  • André van StelEmail author
  • Roy Thurik


We investigate the interplay among entrepreneurial activity, business cycles and unemployment in relation to economic openness. Additionally, we explore to what extent the observation frequency (quarterly versus annual data) influences the estimation results. Following the empirical literature, we estimate a pooled vector autoregression (VAR) model with fixed effects for the three macroeconomic variables. Using both quarterly and annual data for 19 OECD countries for the period 1998–2007, we observe that over the short term (after one quarter), a country’s entrepreneurial activity is stimulated when its business cycle lags behind the world business cycle, whereas over the medium term (after 1 to 2 years), entrepreneurial activity is stimulated when its business cycle leads the world business cycle. This pattern suggests that a country’s business cycle position relative to the world cycle creates different types of entrepreneurial opportunities depending on the time horizon considered. These results apply only to economies that are relatively open, which suggests that economic openness plays a role in generating entrepreneurial opportunities related to a country’s cyclical performance.


Entrepreneurship Self-employment Unemployment Business cycle World trade Open economies 



This research has been supported by the research program SCALES conducted by Panteia/EIM and financed by the Dutch Ministry of Economic Affairs.


  1. Aitken, B., Hanson, G. H., & Harrison, A. E. (1997). Spillovers, foreign investment and export behavior. Journal of International Economics, 43(1–2), 103–132.CrossRefGoogle Scholar
  2. Audretsch, D. B., & Keilbach, M. (2004). Entrepreneurship capital and economic performance. Regional Studies, 38, 949–959.CrossRefGoogle Scholar
  3. Baptista, R., & Thurik, A. R. (2007). The relationship between entrepreneurship and employment: is Portugal an outlier? Technological Forecasting and Social Change, 74, 75–89.CrossRefGoogle Scholar
  4. Carree, M. A., & Thurik, A. R. (2010). The impact of entrepreneurship on economic growth. In D. B. Audretsch & Z. J. Acs (Eds.), Handbook of entrepreneurship research (pp. 557–594). Berlin/Heidelberg: Springer Verlag.CrossRefGoogle Scholar
  5. Carree, M., van Stel, A. J., Thurik, A. 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, 271–290.CrossRefGoogle Scholar
  6. Christiano, L. J., & Eichenbaum, M. (1987). Temporal aggregation and structural inference in macroeconomics. Carnegie-Rochester Conference Series on Public Policy, 26, 63–130.CrossRefGoogle Scholar
  7. Congregado, E., Golpe, A., & van Stel, A. J. (2012). The ‘recession-push’ hypothesis reconsidered. International Entrepreneurship and Management Journal, 8(3), 325–342.CrossRefGoogle Scholar
  8. De Clercq, D., Hessels, J., & van Stel, A. J. (2008). Knowledge spillovers and new ventures’ export orientation. Small Business Economics, 31(3), 283–303.CrossRefGoogle Scholar
  9. Faria, J. R., Cuestas, J. C., & Gil-Alana, L. A. (2009). Unemployment and entrepreneurship: a cyclical relation? Economics Letters, 105(3), 318–320.CrossRefGoogle Scholar
  10. Fritsch, M., & Mueller, P. (2004). The effects of New business formation on regional development over time. Regional Studies, 38, 961–975.CrossRefGoogle Scholar
  11. Golpe, A.A. (2009), Self-Employment and Business Cycles, PhD thesis, University of Huelva, Spain.Google Scholar
  12. Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 37, 424–438.CrossRefGoogle Scholar
  13. Hodrick, R. J., & Prescott, E. C. (1997). Postwar U.S. Business cycles: an empirical investigation. Journal of Money, Credit and Banking, 29, 1–16.CrossRefGoogle Scholar
  14. Koellinger, P. D., & Thurik, A. R. (2012). Entrepreneurship and the business cycle. Review of Economics and Statistics, 94(4), 1143–1156.CrossRefGoogle Scholar
  15. Lamballais Tessensohn, T., Thurik A.R. (2012). The relation between different kinds of nascent entrepreneurship and the business cycle, In: P. Braunerhjelm (Ed.), Entrepreneurship, Norms and the Business Cycle, Swedish Entrepreneurship Forum Report 2012, 53–72.Google Scholar
  16. Lucas, R. E. (1978). On the size distribution of firms. BELL Journal of Economics, 9, 508–523.CrossRefGoogle Scholar
  17. Marcotte, C. (2013). Measuring entrepreneurship at the country level: a review and research agenda. Entrepreneurship and Regional Development, 25(3–4), 174–194.CrossRefGoogle Scholar
  18. Mueller, P., van Stel, A. J., & Storey, D. J. (2008). The effects of new firm formation on regional development over time: the case of Great Britain. Small Business Economics, 30(1), 59–71.Google Scholar
  19. Parker, S. C. (2009). The economics of entrepreneurship. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  20. Parker, S. C. (Ed.). (2011). Entrepreneurship in recession. Cheltenham: Edward Elgar Publishing Limited.Google Scholar
  21. Parker, S. C. (2012a). Theories of entrepreneurship, innovation and the business cycle. Journal of Economic Surveys, 26(3), 377–394.CrossRefGoogle Scholar
  22. Parker, S.C. (2012b). Entrepreneurship and the Business Cycle: Evidence and Implications for Policy-Makers, In: P. Braunerhjelm (Ed.), Entrepreneurship, Norms and the Business Cycle, Swedish Entrepreneurship Forum Report 2012, 35–51.Google Scholar
  23. Parker, S. C., Congregado, E., & Golpe, 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.CrossRefGoogle Scholar
  24. Ravn, M. O., & Uhlig, H. (2002). On adjusting the Hodrick-Prescott filter for the frequency of observations. Review of Economics and Statistics, 84, 371–376.CrossRefGoogle Scholar
  25. Rodrik, D. (1998). Why do more open economies have bigger governments? Journal of Political Economy, 106, 997–1032.CrossRefGoogle Scholar
  26. Thurik, A. R. (2003). Entrepreneurship and unemployment in the UK. Scottish Journal of Political Economy, 50(3), 264–290.CrossRefGoogle Scholar
  27. Thurik, A. R., Carree, M. A., van Stel, A. J., & Audretsch, D. B. (2008). Does self-employment reduce unemployment? Journal of Business Venturing, 23(6), 673–686.CrossRefGoogle Scholar
  28. Van Praag, C. M., & van Stel, A. J. (2013). The more business owners, the merrier? The role of tertiary education. Small Business Economics, 41(2), 335–357.CrossRefGoogle Scholar
  29. Van Praag, C. M., & Versloot, P. H. (2007). What is the value of entrepreneurship? A review of recent research. Small Business Economics, 29, 351–382.CrossRefGoogle Scholar
  30. Van Stel, A. J. (2005). COMPENDIA: harmonizing business ownership data across countries and over time. International Entrepreneurship and Management Journal, 1(1), 105–123.CrossRefGoogle Scholar
  31. Van Stel, A. J., Wennekers, S., & Scholman, G. (2014). Solo self-employed versus employer entrepreneurs: determinants and macro-economic effects in OECD countries. Eurasian Business Review, 4(1), 107–136.Google Scholar

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Gerard Scholman
    • 1
  • André van Stel
    • 1
    • 2
    Email author
  • Roy Thurik
    • 3
    • 1
    • 4
  1. 1.Panteia/EIMZoetermeerThe Netherlands
  2. 2.Kozminski UniversityWarsawPoland
  3. 3.Erasmus School of EconomicsErasmus University RotterdamRotterdamThe Netherlands
  4. 4.Montpellier Business SchoolMontpellierFrance

Personalised recommendations