The impact of the economic crisis on latent and early entrepreneurship in Europe

  • Federico VegettiEmail author
  • Dragoş Adăscăliţei


The recent economic crisis has thrown many European economies into a period of slow growth and high unemployment. While previous research looked at the impact of the crisis on aggregate indicators of entrepreneurship, not much is known about whether and how it affected individual motivations and efforts to become self-employed. This study aims to fill this gap by looking at the impact of the crisis on latent and early entrepreneurship, as well as on the link between the two. We combine individual and country-level data from 25 EU member states from 2006 to 2012. Results of multilevel logistic regressions show that the decrease in entrepreneurial activity in the post-crisis period has been stronger in countries where access to finance for SMEs has been more difficult. Moreover, we show that the high level unemployment generated by the economic crisis has produced a “refugee effect” by pushing into entrepreneurship only those individuals who are not interested in such a career choice.


Economic crisis Access to finance Entrepreneurship Europe 


  1. Acs, Z. (2006). How is entrepreneurship good for economic growth?. Innovations: Technology, Governance, Globalization, 1(1), 97–107.CrossRefGoogle Scholar
  2. Agarwal, R., Audretsch, D., & Sarkar, M. B. (2007). The process of creative construction: knowledge spillovers, entrepreneurship, and economic growth. Strategic Entrepreneurship Journal, 1(3-4), 263–286.CrossRefGoogle Scholar
  3. Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior and Human Decision Processes, 50(2), 179–211.CrossRefGoogle Scholar
  4. Ajzen, I., & Fishbein, M. (2005) In Albarracín, D., Johnson, B. T., & Zanna, M. P. (Eds.), The influence of attitudes on behavior, (pp. 173–221). Mahwah: Erlbaum.Google Scholar
  5. Arenius, P., & Minniti, M. (2005). Perceptual variables and nascent entrepreneurship. Small Business Economics, 24(3), 233–247.CrossRefGoogle Scholar
  6. Audretsch, D. B., & Acs, Z. J. (1994). New-firm startups, technology, and macroeconomic fluctuations. Small Business Economics, 6(6), 439–449.CrossRefGoogle Scholar
  7. Baliamoune-Lutz, M. (2015). Taxes and entrepreneurship in OECD countries. Contemporary Economic Policy, 33(2), 369–380.CrossRefGoogle Scholar
  8. Baron, R. A. (2014). Entrepreneurship: a process perspective. In Baum, J. R., Frese, M., & Baron, R. A. (Eds.) The Psychology of Entrepreneurship.Psychology Press.Google Scholar
  9. Bassetto, M., Cagetti, M., & De Nardi, M. (2015). Credit crunches and credit allocation in a model of entrepreneurship. Review of Economic Dynamics, 18 (1), 53–76.CrossRefGoogle Scholar
  10. Baumol, W. J., & Strom, R. J. (2007). Entrepreneurship and economic growth. Strategic Entrepreneurship Journal, 1(3-4), 233–237.CrossRefGoogle Scholar
  11. Black, S. E., & Strahan, P. E. (2002). Entrepreneurship and bank credit availability. The Journal of Finance, 57(6), 2807–2833.CrossRefGoogle Scholar
  12. Blanchflower, D. G. (2000). Self-employment in OECD countries. Labour Economics, 7, 471–505.CrossRefGoogle Scholar
  13. Blanchflower, D. G., Oswald, A., & Stutzer, A. (2001). Latent entrepreneurship across nations. European Economic Review, 45(4), 680–691.CrossRefGoogle Scholar
  14. Brixy, U., Sternberg, R., & Stüber, H. (2012). The selectiveness of the entrepreneurial process. Journal of Small Business Management, 50(1), 105–131.CrossRefGoogle Scholar
  15. Carbo-Valverde, S., Rodriguez-Fernandez, F., & Udell, G. F. (2016). Trade credit, the financial crisis, and SME access to finance. Journal of Money, Credit and Banking, 48(1), 113–143.CrossRefGoogle Scholar
  16. Carmo Farinha, L. M., Fereira, J. J., Lawton Smith, H., & Bagchi-Sen, S. (2015). Handbook of Research on Global Competitive Advantage through Innovation and Entrepreneurship, IGI Global.Google Scholar
  17. Constant, A. F., & Zimmermann, K. F. (2004). Self-employment dynamics across the business cycle: migrants versus natives. IZA Discussion paper series.Google Scholar
  18. Davidsson, P. (2006). Nascent entrepreneurship: empirical studies and developments. Foundations and Trends in Entrepreneurship, 2(1), 1–76.CrossRefGoogle Scholar
  19. Deli, F. (2011). Opportunity and necessity entrepreneurship: local unemployment and the small firm effect. Journal of Management Policy and Practice, 12(4), 38–57.Google Scholar
  20. DG Taxation and Customs Union (2016). Taxation trends in the European Union, Technical report, Publications Office of the European Union, Luxembourg.
  21. ECB (2012). Euro area labour markets and the crisis. Occasional Paper Series (138).Google Scholar
  22. European Commission (2008). Flash Eurobarometer 192 (Entrepeneurship). doi:
  23. European Commission (2011). Flash Eurobarometer 283 (Entrepreneurship in the EU and Beyond). doi: 10.4232/1.10210.
  24. European Commission (2013). Flash Eurobarometer 354 (Entrepreneurship in the EU and Beyond). doi: 10.4232/1.11590.
  25. Faggio, G., & Silva, O. (2014). Self-employment and entrepreneurship in urban and rural labour markets. Journal of Urban Economics, 84, 67–85.CrossRefGoogle Scholar
  26. Fairlie, R. W. (2013). Entrepreneurship, economic conditions, and the great recession. Journal of Economics & Management Strategy, 22(2), 207–231.CrossRefGoogle Scholar
  27. Festinger, L. (1957). A theory of cognitive dissonance. Stanford University Press.Google Scholar
  28. Gilad, B., & Levine, P. (1986). A behavioral model of entrepreneurial supply. Journal of Small Business Management, 24, 45.Google Scholar
  29. Gohmann, S. F. (2012). Institutions, latent entrepreneurship, and self-employment: an international comparison. Entrepreneurship Theory and Practice, 36(2), 295–321.CrossRefGoogle Scholar
  30. Grilo, I., & Irigoyen, J.-M. (2006). Entrepreneurship in the EU: to wish and not to be. Small Business Economics, 26(4), 305–318.CrossRefGoogle Scholar
  31. Grilo, I., & Thurik, R. (2005). Latent and actual entrepreneurship in Europe and the US: some recent developments. The International Entrepreneurship and Management Journal, 1(4), 441–459.CrossRefGoogle Scholar
  32. IMF (2015). World economic outlook database.
  33. Jiménez, A., Palmero-Cámara, C., González-Santos, M. J., González-Bernal, J., & Jiménez-Eguizábal, J. A. (2015). The impact of educational levels on formal and informal entrepreneurship. Business Research Quarterly, 18, 204–212.CrossRefGoogle Scholar
  34. Klapper, L., & Love, I. (2011). The impact of the financial crisis on new firm registration. Economics Letters, 113(1), 1–4.CrossRefGoogle Scholar
  35. Klapper, L., Love, I., & Randall, D. (2015). New firm registration and the business cycle. International Entrepreneurship and Management Journal, 11(2), 287–306.CrossRefGoogle Scholar
  36. Koellinger, P. D., & Thurik, A. R. (2011). Entrepreneurship and the business cycle. The Review of Economics and Statistics, 94(4), 1143–1156.CrossRefGoogle Scholar
  37. Leibenstein, H. (1968). Entrepreneurship and development. The American Economic Review, 58(2), 72–83.Google Scholar
  38. Lévesque, M., & Minniti, M. (2006). The effect of aging on entrepreneurial behavior. Journal of Business Venturing, 21(2), 177–194.CrossRefGoogle Scholar
  39. Lindquist, M. J., Sol, J., & Van Praag, M. (2015). Why do entrepreneurial parents have entrepreneurial children. Journal of Labor Economics, 33(2), 269–296.Google Scholar
  40. Matsusaka, J. G., & Sbordone, A. M. (1995). Consumer confidence and economic fluctuations. Economic Inquiry, 33(2), 296–318.CrossRefGoogle Scholar
  41. Minniti, M., & Naudé, W. (2010). What do we know about the patterns and determinants of female entrepreneurship across countries?. European Journal of Development Research, 22(3), 277–293.CrossRefGoogle Scholar
  42. OECD (2009). The impact of the global crisis on SME and entrepreneurship financing and policy responses.Google Scholar
  43. Paniagua, J., & Sapena, J. (2015). The effect of systemic banking crises on entrepreneurship. In Peris-Ortiz, M., & Sahut, J.-M. (Eds.) New Challenges in Entrepreneurship and Finance, (pp. 195–207). Springer.Google Scholar
  44. Payne, J.E. (2015). The US entrepreneurship-unemployment nexus. In Cebula, R.J., Hall, C., Mixon, F.G.J., & Payne, J.E. (Eds.), Economic Behavior, Economic Freedom, and Entrepreneurship (pp. 260–271): Edward Elgar Publishing.Google Scholar
  45. Peris-Ortiz, M., Fuster-Estruch, V., & Devece-Carañana, C. (2014). Entrepreneurship and Innovation in a Context of Crisis. In Rüdiger, K., Ortiz, M. P., & González, A. B. (Eds.) Entrepreneurship, Innovation and Economic Crisis (pp. 1–10). Springer International Publishing.Google Scholar
  46. Reynolds, P., & White, S. B. (1997). The Entrepreneurial Process: Economic Growth, Men, Women, and Minorities. Praeger: Conn.Google Scholar
  47. Reynolds, P., Bosma, N., Autio, E., Hunt, S., Bono, N. D., Servais, I., Lopez-Garcia, P., & Chin, N. (2005). Global entrepreneurship monitor: data collection design and implementation 1998–2003. Small Business Economics, 24(3), 205–231.CrossRefGoogle Scholar
  48. Sannajust, A. (2014). Impact of the world financial crisis to SMEs: the determinants of bank loan rejection in Europe and USA, Working Paper 2014-327, Department of Research, Ipag Business School.
  49. Shane, S., & Venkataraman, S. (2000). The promise of entrepreneurship as a field of research. The Academy of Management Review, 25(1), 217–226.Google Scholar
  50. Starr, M. A. (2012). Consumption, sentiment, and economic news. Economic Inquiry, 50(4), 1097–1111.CrossRefGoogle Scholar
  51. van der Zwan, P., Thurik, R., Verheul, I., & Hessels, J. (2016). Factors influencing the entrepreneurial engagement of opportunity and necessity entrepreneurs. Eurasian Business Review, 6(3), 273–295.Google Scholar
  52. van Stel, A., Storey, D. J., & Thurik, A. R. (2007). The effect of business regulations on nascent and young business entrepreneurship. Small Business Economics, 28(2-3), 171–186.Google Scholar
  53. Wagner, J. (2006). The life cycle Of entrepreneurial ventures In Parker, S. (Ed.), Nascent Entrepreneurs. New York: Springer.CrossRefGoogle Scholar
  54. Wennekers, S., & Thurik, R. (1999). Linking entrepreneurship and economic growth. Small Business Economics, 13(1), 27–56.CrossRefGoogle Scholar
  55. 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
  56. Wood, B. D., Owens, C. T., & Durham, B. M. (2005). Presidential rhetoric and the economy. Journal of Politics, 67(3), 627–645.CrossRefGoogle Scholar
  57. World Bank (2013). World development indicators |Data.

Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.Department of Political ScienceCentral European UniversityBudapestHungary
  2. 2.Center for Policy StudiesCentral European UniversityBudapestHungary

Personalised recommendations