Skip to main content

Advertisement

SpringerLink
Log in

Do freelance independent contractors promote entrepreneurship?

  • Published:
Small Business Economics Aims and scope Submit manuscript

Abstract

We investigate whether or not the level of entrepreneurial activity in an economy is determined by the availability of freelance independent contractors in the workforce. We develop hypotheses and test them through an analysis of 75 countries from 2002 to 2012 using the Global Entrepreneurship Monitor (GEM) database. We find freelance independent contractors promote entrepreneurial activity where typically a 10% rise in the freelance workforce causes about a 1% increase in entrepreneurial activity. The significance of this positive effect is robust for both necessity and opportunity-driven entrepreneurial types and across innovation-driven and efficiency-driven economies—but it is stronger in innovation-driven economies and also for necessity entrepreneurship. It implies that having a flexible workforce is a key ingredient to having an entrepreneurial economy. Furthermore, it indicates that orthodox research and public policy perspectives which overlook the importance of freelance independent contractors for entrepreneurship activity require a re-appraisal.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. The measure of GDP used in our analysis is in PPP at constant prices of 2011 in USD, having data in PPP ensures comparison across the countries while holding it constant at 2011 prices ensures comparability across time (see Feenstra et al. (2015)).

  2. We choose 0.05 as the value for (g + d) (see Caselli et al. 1996; Islam 1995 and Mankiw et al. 1992).

References

  • Acs, Z. J., & Gifford, S. (1996). Innovation of entrepreneurial firms. Small Business Economics, 8(3), 203–218.

    Google Scholar 

  • Acs, Z. J., Audretsch, D. B., & Evans, D. S. (1994). Why does the self-employment rate vary across countries and over time. London: CEPR.

    Google Scholar 

  • Acs, Z. J., Desai, S., & Hessels, J. (2008). Entrepreneurship, economic development and institutions. Small Business Economics, 31(3), 219–234.

    Google Scholar 

  • Acs, Z. J., Audretsch, D. B., Braunerhjelm, P., & Carlsson, B. (2012). Growth and entrepreneurship. Small Business Economics, 39(2), 289–300.

    Google Scholar 

  • Anokhin, S., & Schulze, W. S. (2009). Entrepreneurship, innovation, and corruption. Journal of Business Venturing, 24(5), 465–476.

    Google Scholar 

  • Armington, C., & Acs, Z. J. (2002). The determinants of regional variation in new firm formation. Regional Studies, 36(1), 33–47.

    Google Scholar 

  • Atkinson, J. (1984). Manpower strategies for flexible organizations. Personnel Management, 16, 28–31.

    Google Scholar 

  • Audretsch, D. B. (1995). Innovation and industry evolution. Cambridge: The MIT Press.

    Google Scholar 

  • Audretsch, D., & Thurik, R. (2004). A model of the entrepreneurial economy. International Journal of Entrepreneurship Education, 2, 143–166.

    Google Scholar 

  • Audretsch, D. B., Kuratko, D. F., & Link, A. N. (2015). Making sense of the elusive paradigm of entrepreneurship. Small Business Economics, 45(4), 703–712.

    Google Scholar 

  • Bakker, R. M. (2010). Taking stock of temporary organizational forms: a systematic review and research agenda. International Journal of Management Reviews, 12(4), 466–486.

    Google Scholar 

  • Barley, S. R., & Kunda, G. (2006). Contracting: a new form of professional practice. Academy of Management Perspectives, 20(1), 45–66.

    Google Scholar 

  • Barro, R. J. (1998). Determinants of economic growth: a cross country empirical study. Cambridge: MIT Press.

    Google Scholar 

  • Barro, R. J., & Lee, J. W. (2013). A new data set of educational attainment in the world, 1950-2010. Journal of Development Economics, 104, 184–198. Available at:. https://doi.org/10.1016/j.jdeveco.2012.10.001.

    Article  Google Scholar 

  • Bhide, A. (2008). The venturesome economy: how innovation sustains prosperity in a more connected world. Princeton and Oxford: Princeton University Press.

    Google Scholar 

  • Block, J. H., Kohn, K., Miller, D., & Ullrich, K. (2015). Necessity entrepreneurship and competitive strategy. Small Business Economics, 44(1), 37–54.

    Google Scholar 

  • Bögenhold, D., Heinonen, J., & Akola, E. (2014). Entrepreneurship and independent professionals: social and economic logics. International Advances in Economic Research, 20(3), 295–310.

    Google Scholar 

  • Burke, A. (2009). Strategies for entrepreneurial success. Journal of Strategic Management Education, 5(1), 33–44.

    Google Scholar 

  • Burke, A. (2011). The entrepreneurship enabling role of freelancers: theory with evidence from the construction industry. International Review of Entrepreneurship, 9(3), 131–158.

    Google Scholar 

  • Burke, A. (2012). The role of freelancers in the 21st century British economy. London: PCG.

    Google Scholar 

  • Burke, A. E. (2019). The freelance project and gig economies of the 21st century. London: PCG. http://crse.co.uk/sites/default/files/The%20Freelance%20Project%20and%20Gig%20Economies%20of%20the%2021st%20Century.pdf.

  • Burke, A., & Cowling, M. (2015). The use and value of freelancers: the perspective of managers. In A. Burke (Ed.), The handbook of research on freelancing and self-employment (pp. 1–14). Senate Hall: Dublin.

    Google Scholar 

  • Burke, A. & Hussels, S., (2013). How competition strengthens startups. Harvard Business Review, 91(3).

  • Caselli, F., Esquivel, G., & Lefort, F. (1996). Reopening the convergence debate: a new look at cross-country growth empirics. Journal of Economic Growth, 1(3), 363–389.

    Google Scholar 

  • DeFillipi, R. J. (2001). Introduction: project-based learning, reflective practices and learning outcomes. Management Learning, 32, 5–10.

    Google Scholar 

  • Evans, D. S., & Jovanovic, B. (1989). An estimated model of entrepreneurial choice under liquidity constraints. Journal of Political Economy, 97(4), 519–535.

    Google Scholar 

  • Feenstra, R. C., Inklaar, R., & Timmer, M. P. (2015). The next generation of the Penn World Table. American Economic Review, 105(10), 3150–3182.

    Google Scholar 

  • Foreman-Peck, J. (1985). Seedcorn or chaff? New firm formation and the performance of the interwar economy. Economic History Review, 38(3), 402–422.

    Google Scholar 

  • Fritsch, M., & Falck, O. (2007). New business formation by industry over space and time: a multidimensional analysis. Regional Studies, 41(2), 157–172.

    Google Scholar 

  • Fritsch, M., & Mueller, P. (2007). The persistence of regional new business formation-activity over time—assessing the potential of policy promotion programs. Journal of Evolutionary Economics, 17(3), 299–315.

    Google Scholar 

  • Gould, D., & Amaro-Reyes, J. (1983). The effects of corruption on administrative performance: illustrations from developing countries. In Gupta (Ed.), Governance, corruption & economic performance (pp. 489–537). Washington, D.C: International Monetary Fund Publication Services.

    Google Scholar 

  • Guest, D. (2004). Flexible employment contracts, the psychological contract and employee outcomes: an analysis and review of the evidence. International Journal of Management Reviews, 5–6(1), 1–19.

    Google Scholar 

  • Islam, N. (1995). Growth empirics: a panel data approach. The Quarterly Journal of Economics, 110(4), 1127–1170.

    Google Scholar 

  • Jahn, E., Riphahn, R. T., & Schnabel, C. (2012). Flexible forms of employment: boon and bane. Laser Discussion Papers, 62, 18–19.

    Google Scholar 

  • Karmann, T., Mauer, R., Flatten, T. C., & Brettel, M. (2016). Entrepreneurial orientation and corruption. Journal of Business Ethics, 133(2), 223–234.

    Google Scholar 

  • Kher, R., Streeter, D., & Just, D. R. (2012). The “good job” trap: opportunity cost as a deterrent to immediate venture creation. International Review of Entrepreneurship, 10(4), 127–152.

    Google Scholar 

  • Kitching, J. (2015). Tracking UK freelance workforce trends 1992-2015. In A. Burke (Ed.), The handbook of research on freelancing and self-employment (pp. 15–28). Senate Hall: Dublin.

    Google Scholar 

  • Leff, N. H. (1964). Economic development through bureaucratic corruption. The American Behavior Scientist, 8(2), 8–14.

    Google Scholar 

  • Leighton, P. & Brown, D. (2013). Future working: The rise of Europe’s independent professionals (iPros). London: PCG.

  • Liang, J., & Goetz, S. J. (2016). Self-employment and trade shock mitigation. Small Business Economics, 46(1), 45–56.

    Google Scholar 

  • Lucas, R. E. J. (1978). On the size distribution of business firms. Bell Journal of Economics, 9, 508–523.

    Google Scholar 

  • Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A contribution to the empirics of economic growth. Quarterly Journal of Economics, 107(2), 407–437.

    Google Scholar 

  • Marvel, M. R., Davis, J. L., & Sproul, C. R. (2016). Human capital and entrepreneurship research: a critical review and future directions. Entrepreneurship: Theory and Practice, 40(3), 599–626.

    Google Scholar 

  • Mauro, P. (1995). Corruption and growth. Quarterly Journal of Economics, 110, 681–712.

    Google Scholar 

  • Murphy, K. M., Shleifer, A., & Vishny, R. W. (1993). Why is rent-seeking so costly to growth? American Economic Review, 84, 409–414.

    Google Scholar 

  • Porter, M., Sachs, J., & McArthur, J. (2002). Executive summary: competitiveness and stages of economic development. In M. Porter et al. (Eds.), The global competitiveness report 2001-2002 (pp. 16–25). New York: Oxford University Press.

    Google Scholar 

  • Psacharopoulos, & Patrinos, H. A. (2004). Return to investment in education: a further update. Education Economics, 12(2), 111–134.

    Google Scholar 

  • Reynolds, P. D., Hay, M., & Camp, S. M. (1999). GEM global 1999 executive report. Kansas City: Kaufman Center.

    Google Scholar 

  • Reynolds, P. D., Bygrave, W. D., Autio, E., Cox, L. W., & Hay, M. (2002). Global entrepreneurship monitor 2002 executive report. https://doi.org/10.13140/RG.2.1.1977.0409.

  • Ries, E. (2011). The lean startup. New York: Crown Business.

    Google Scholar 

  • Storey, D. J. (1991). The birth of new firms—does unemployment matter? A review of the evidence. Small Business Economics, 3(3), 167–178.

    Google Scholar 

  • Thurik, A. R., Carree, M. A., Van Stel, A., & Audretsch, D. B. (2008). Does self-employment reduce unemployment? Journal of Business Venturing, 23(6), 673–686.

    Google Scholar 

  • Unger, J. M., Rauch, A., Frese, M., & Rosenbusch, N. (2011). Human capital and entrepreneurial success: a meta-analytical review. Journal of Business Venturing, 26(3), 341–358.

    Google Scholar 

  • Verheul, I., Wennekers, S., Audretsch, D., & Thurik, A. R. (2002). An eclectic theory of entrepreneurship: policies, institutions and culture. In D. B. Audretsch, A. R. Thurik, I. Verheul, & S. Wennekers (Eds.), Entrepreneurship: determinants and policy in a European-US comparison (pp. 11–81). Boston: Kluwer Academic Publishers.

    Google Scholar 

  • 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.

    Google Scholar 

  • Wennekers, S., van Stel, A., Carree, M., & Thurik, R. (2010). The relationship between entrepreneurship and economic development: is it U-shaped? Foundations and Trends in Entrepreneurship, 6(3), 167–237.

    Google Scholar 

  • Wong, P. K., Ho, Y. P., & Autio, E. (2005). Entrepreneurship, innovation and economic growth: evidence from GEM data. Small Business Economics, 24(3), 335–350.

    Google Scholar 

  • Wooldridge, J. M. (2002). Introductory econometrics: a modern approach (2nd ed.). Ohio: South Western College Publishing.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Trinity Business School, Trinity College Dublin, University of Dublin, Dublin 2, Ireland

    Andrew Burke

  2. Cranfield School of Management, Cranfield University, Cranfield, Bedfordshire, MK43 0AL, UK

    Imran Zawwar & Stephanie Hussels

Authors
  1. Andrew Burke
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Imran Zawwar
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Stephanie Hussels
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Andrew Burke.

Additional information

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Appendix

Appendix

Fig. 1
figure 1

Correlation between TEA and independent contractors. a Aggregate world sample. b Innovation-driven countries. c Efficiency-driven countries

Full size image
Table 5 List of efficiency-, innovation-, and factor-driven countries in the dataset
Full size table
Table 6 Summary description of variables and data sources
Full size table
Table 7 Descriptive statistics of independent contractors and TEA
Full size table

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Burke, A., Zawwar, I. & Hussels, S. Do freelance independent contractors promote entrepreneurship?. Small Bus Econ 55, 415–427 (2020). https://doi.org/10.1007/s11187-019-00242-w

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11187-019-00242-w

Keywords

JEL classification

Search

Navigation