Abstract
The Global Entrepreneurship Monitor model combines insights on the allocation of effort into entrepreneurship at the national (adult working-age population) level with literature in the Austrian tradition. The model suggests that the relationship between national-level new business activity and the institutional environment, or Entrepreneurial Framework Conditions, is mediated by opportunity perception and the perception of start-up skills in the population. We provide a theory-grounded examination of this model and test the effect of one EFC, education and training for entrepreneurship, on the allocation of effort into new business activity. We find that in high-income countries, opportunity perception mediates fully the relationship between the level of post-secondary entrepreneurship education and training in a country and its rate of new business activity, including high-growth expectation new business activity. The mediating effect of skills perception is weaker. This result accords with the Kirznerian concept of alertness to opportunity stimulating action.
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Notes
Note that we are not suggesting that the GEM model would constitute a ‘theory’ in its own right. To provide for meaningful interpretation of the GEM data, it is nevertheless important to discuss how the model relates to influential schools of thought within the domain of entrepreneurship.
The box labeled New Firms was originally labeled Business Dynamics (Reynolds et al. 1999), then from 2000 to 2003 was labeled Business Churning (Reynolds et al. 2000, 2001a, b, 2002, 2003), and from 2004 to 2005 was labeled New Firms (Acs et al. 2005; Minniti et al. 2006). In the latest iteration (Bosma et al. 2008), it is labeled Early-Stage Entrepreneurial Activity.
We would suggest adding the word “Economic” to this box in the GEM model.
For an alternative reconciliation of the Schumpeterian and Kirznerian positions, which the GEM model could also accommodate, see Leibenstein (1987).
Strictly speaking, Baumol’s main focus was on the allocation of entrepreneurs into ‘productive’ and ‘unproductive’ activities. Baumol’s notion of the allocation of effort can easily be extended to consider the allocation of effort into entrepreneurship in general.
In a 1978 update of his earlier paper, Leibenstein renamed this “innovational” entrepreneurship (Leibenstein 1978, p. 40).
In relation to motivation, we note a recent review of entrepreneurial motivation by Shane et al. (2003) in which the authors urge researchers to control for opportunity in studies of motivation. The GEM model may act as a useful guide in this respect.
The focus of the GEM model is on what Baumol terms productive entrepreneurship. Thus, it is not relevant to the GEM model whether, as Baumol suggests, some individuals are entrepreneurial and others are not, and the question is what makes entrepreneurs choose productive over unproductive or destructive entrepreneurship, or whether, as von Mises suggests, anyone can behave entrepreneurially and the question is what prompts people to behave entrepreneurially rather than non-entrepreneurially.
Indeed, in some countries, entrepreneurs are not permitted to trade until they can prove they have acquired such facilities. See, for example, http://www.doingbusiness.org/ExploreTopics/StartingBusiness/Details.aspx?economyid=195, accessed 21 June 2008.
The latter has been traditionally referred to by GEM as “Cultural and Social Norms”. To distinguish it clearly from universal values, consideration might be given to changing the label to Entrepreneurial Attitudes.
We do not consider the effect of entrepreneurship education and training on motivation further in this paper.
The GEM 2000–2006 dataset covered the following high-income countries: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Israel, Italy, Japan, The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Taiwan, the United Kingdom and USA. In addition, the dataset included the following low-income countries, defined as countries with GDP per capita less than US $20,000: Argentina, Brazil, Chile, China, Colombia, Croatia, Ecuador, Hungary, India, Indonesia, Jamaica, Jordan, Latvia, Malaysia, Mexico, Peru, Philippines, Poland, Russia, Slovenia, South Africa, South Korea, Thailand, Turkey, Uganda, Uruguay and Venezuela.
Although Baumol sees his independent innovator as a synonym for Schumpeter’s entrepreneur, we interpret Schumpeter’s entrepreneur as the fulfiller of the function ‘new business activity;’ “not only those “independent” businessmen in an exchange economy who are usually so designated” (Schumpeter 1934, p. 74).
In the data there were a number of unrealistically high job-expectation figures. We carefully examined the shapes of job expectation distributions and determined that any start-up attempt expecting more than 996 jobs could be set to zero without biasing the distribution.
http://www.imf.org/external/ns/cs.aspx?id=28—accessed in August 2007.
Correlation matrix is available from the authors upon request.
We ran all tests using both fixed-effect and random-effect specification, as well as specifying robust and non-robust standard errors (i.e., with and without assuming heteroscedasticity in error terms). No major differences in results were observed, and none of the significant influences reported in this paper showed sensitivity to analysis specification. As a further check of robustness, we also employed a large number of different variable combinations, as well as different model specifications. The core findings, as reported in Tables 1–4, were remarkably insensitive to model specifications.
An interesting pattern in the data, not reported here because of space and data limitations, concerned the differing role of primary and higher educational institutions in low- and high-income economies, respectively. Where we observed a mediating effect for higher education EFC, opportunity perception and entrepreneurship in high-income economies, a similar mediation was observed for primary education EFC, opportunity perception and TEA in low-income economies. This may suggest that the role of the educational system varies according to the level of economic development.
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Acknowledgements
Both authors contributed equally to the development of this article. They are grateful to Paul Reynolds, David Audretsch and Zoltan Acs and to participants in the 2007 GEM Research Conference, Washington, D.C., for their encouragement and comments.
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Appendix 1
Appendix 1
Items employed in the 2006 National Expert Survey
EFC type | Item code | Item wording |
|---|---|---|
Finance EFC | A01 | In my country, there is sufficient equity funding available for new and growing firms |
Finance EFC | A02 | In my country, there is sufficient debt funding available for new and growing firms |
Finance EFC | A03 | In my country, there are sufficient government subsidies available for new and growing firms |
Finance EFC | A04 | In my country, there is sufficient funding available from private individuals (other than founders) for new and growing firms |
Finance EFC | A05 | In my country, there is sufficient venture capitalist funding available for new and growing firms |
Finance EFC | A06 | In my country, there is sufficient funding available through initial public offerings (IPOs) for new and growing firms |
Policy EFC | B01 | In my country, government policies (e.g., public procurement) consistently favor new firms |
Policy EFC | B02 | In my country, the support for new and growing firms is a high priority for policy at the national government level |
Policy EFC | B03 | In my country, the support for new and growing firms is a high priority for policy at the local government level |
Regulations EFC | B04 | In my country, new firms can get most of the required permits and licenses in about a week |
Regulations EFC | B05 | In my country, the amount of taxes is NOT a burden for new and growing firms |
Regulations EFC | B06 | In my country, taxes and other government regulations are applied to new and growing firms in a predictable and consistent way |
Regulations EFC | B07 | In my country, coping with government bureaucracy, regulations and licensing requirements is not unduly difficult for new and growing firms |
Programs EFC | C01 | In my country, a wide range of government assistance for new and growing firms can be obtained through contact with a single agency |
Programs EFC | C02 | In my country, science parks and business incubators provide effective support for new and growing firms |
Programs EFC | C03 | In my country, there are an adequate number of government programs for new and growing businesses |
Programs EFC | C04 | In my country, the people working for government agencies are competent and effective in supporting new and growing firms |
Programs EFC | C05 | In my country, almost anyone who needs help from a government program for a new or growing business can find what they need |
Programs EFC | C06 | In my country, government programs aimed at supporting new and growing firms are effective |
Primary education EFC | D01 | In my country, teaching in primary and secondary education encourages creativity, self-sufficiency and personal initiative |
Primary education EFC | D02 | In my country, teaching in primary and secondary education provides adequate instruction in market economic principles |
Primary education EFC | D03 | In my country, teaching in primary and secondary education provides adequate attention to entrepreneurship and new firm creation |
Higher education EFC | D04 | In my country, colleges and universities provide good and adequate preparation for starting up and growing new firms |
Higher education EFC | D05 | In my country, the level of business and management education provides good and adequate preparation for starting up and growing new firms |
Higher education EFC | D06 | In my country, the vocational, professional and continuing education systems provide good and adequate preparation for starting up and growing new firms |
R&D transfer EFC | E01 | In my country, new technology, science, and other knowledge are efficiently transferred from universities and public research centers to new and growing firms |
R&D transfer EFC | E02 | In my country, new and growing firms have just as much access to new research and technology as large, established firms |
R&D transfer EFC | E03 | In my country, new and growing firms can afford the latest technology |
R&D transfer EFC | E04 | In my country, there are adequate government subsidies for new and growing firms to acquire new technology |
R&D transfer EFC | E05 | In my country, the science and technology base efficiently supports the creation of world-class new technology-based ventures in at least one area |
R&D transfer EFC | E06 | In my country, there is good support available for engineers and scientists to have their ideas commercialized through new and growing firms |
Business services EFC | F01 | In my country, there are enough subcontractors, suppliers and consultants to support new and growing firms |
Business services EFC | F02 | In my country, new and growing firms can afford the cost of using subcontractors, suppliers and consultants |
Business services EFC | F03 | In my country, it is easy for new and growing firms to get good subcontractors, suppliers and consultants |
Business services EFC | F04 | In my country, it is easy for new and growing firms to get good, professional legal and accounting services |
Business services EFC | F05 | In my country, it is easy for new and growing firms to get good banking services (checking accounts, foreign exchange transactions, letters of credit and the like) |
Market dynamism EFC | G01 | In my country, the markets for consumer goods and services change dramatically from year to year |
Market dynamism EFC | G02 | In my country, the markets for business-to-business goods and services change dramatically from year to year |
Market openness EFC | G03 | In my country, new and growing firms can easily enter new markets |
Market openness EFC | G04 | In my country, the new and growing firms can afford the cost of market entry |
Market openness EFC | G05 | In my country, new and growing firms can enter markets without being unfairly blocked by established firms |
Market openness EFC | G06 | In my country, the anti-trust legislation is effective and well enforced |
Physical infra EFC | H01 | In my country, the physical infrastructure (roads, utilities, communications, waste disposal) provides good support for new and growing firms |
Physical infra EFC | H02 | In my country, it is not too expensive for a new or growing firm to get good access to communications (phone, Internet, etc.) |
Physical infra EFC | H03 | In my country, a new or growing firm can get good access to communications (telephone, Internet, etc.) in about a week |
Physical infra EFC | H04 | In my country, new and growing firms can afford the cost of basic utilities (gas, water, electricity, sewer) |
Physical infra EFC | H05 | In my country, new or growing firms can get good access to utilities (gas, water, electricity, sewer) in about a month |
Entrep culture EFC | I01 | In my country, the national culture is highly supportive of individual success achieved through own personal efforts |
Entrep culture EFC | I02 | In my country, the national culture emphasizes self-sufficiency, autonomy and personal initiative |
Entrep culture EFC | I03 | In my country, the national culture encourages entrepreneurial risk-taking |
Entrep culture EFC | I04 | In my country, the national culture encourages creativity and innovativeness |
Entrep culture EFC | I05 | In my country, the national culture emphasizes the responsibility that the individual (rather than the collective) has in managing his or her own life |
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Levie, J., Autio, E. A theoretical grounding and test of the GEM model. Small Bus Econ 31, 235–263 (2008). https://doi.org/10.1007/s11187-008-9136-8
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DOI: https://doi.org/10.1007/s11187-008-9136-8