Entrepreneurship: Measurement and its role in global economic development

Zoltan J. Acs

George Mason UniversityMax Planck Institute of Economics

Presentation at the seminar House of Sweden: „Beyond the Crisis – Implications for SMEs and Entrepreneurs”

GCI

IEF EDB

GEI

This Diamond is a Real GEM

GCI = Global Competitiveness IndexIEF = Index of Economic FreedomEDB = Ease of Doing Business IndexGEI = Global Entrepreneurship Indexn=57

GCI

IEF EDB

TEA

-.430**-.323*

-.533**

Spearman Correlations between TEA and the Business Indexes

GCI = Global Competitiveness IndexIEF = Index of Economic FreedomEDB = Ease of Doing Business IndexTEA = Early-stage entrepreneurial activityn=57

Nascent entrepreneurship versus per capita income: the U-curve

FRNL

BEFIUK

HKSETW

ESSI

PL HUHR

ZABRCH

RU

ILIT

AU

DE

JP

NO

US

SWDK

IS

SG

IE CAKR

ARMX NZ

CL

THIN

0

2

4

6

8

10

12

14

0 5 10 15 20 25 30 35 40YCAP 2001 (x1000 PPP per US $)

Nasc

ent r

ate

2002

(%)

Source: Wennekers et al, 2005

The Stages of Economic Development

• Factor Driven Stage• Efficiency Driven Stage• Innovation Driven Stage

Index Building• The Building Blocks

– Attitudes– Activity– Aspirations

• The Institutional Variables– Quality vs quantity

• Dynamics of the Index– The bottleneck method

• The case of Hungary

Global Entrepreneurship Index versus per capita income

Global Entrepreneruship Index

R2 = 0.80

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000

GDP PPP

Rank Country GEINDEX Rank Country GEINDEX1 Denmark 0,779 33 Jordan 0,3482 Canada 0,732 34 China 0,3353 United States 0,732 35 Poland 0,3334 New Zealand 0,686 36 Turkey 0,3255 Sweden 0,682 37 Colombia 0,3236 Ireland 0,644 38 Greece 0,3207 Iceland 0,633 39 Uruguay 0,3208 Switzerland 0,630 40 Croatia 0,3199 Norway 0,629 41 Argentina 0,318

10 Netherlands 0,615 42 Peru 0,31511 Finland 0,606 43 Mexico 0,30612 Australia 0,587 44 Hungary 0,29413 Belgium 0,579 45 Macedonia 0,28614 United Kingdom 0,579 46 Dominican Republic 0,28415 Singapore 0,569 47 Romania 0,28316 Germany 0,544 48 South Africa 0,27917 Puerto Rico 0,534 49 Egypt 0,26918 Slovenia 0,522 50 Thailand 0,25819 Israel 0,520 51 Russia 0,25020 France 0,514 52 India 0,24821 Korea 0,500 53 Indonesia 0,24722 Hong Kong 0,475 54 Brazil 0,23323 Austria 0,469 55 Serbia 0,23224 Italy 0,456 56 Kazakhstan 0,22425 United Arab Emirates 0,447 57 Venezuela 0,21226 Czech Republic 0,435 58 Bosnia and Herzegovina 0,20727 Chile 0,425 59 Iran 0,19028 Spain 0,420 60 Ecuador 0,18629 Japan 0,416 61 Jamaica 0,17130 Latvia 0,402 62 Bolivia 0,16331 Portugal 0,383 63 Uganda 0,15532 Malaysia 0,374 64 Philippines 0,153

GCI

IEF EDB

GEI

0.770.78

0.80*

Spearman Correlations between GE-Index and the Business Indexes

GCI = Global Competitiveness IndexIEF = Index of Economic FreedomEDB = Ease of Doing Business IndexGEI = Global Entrepreneurship Indexn=57

The relative position of Hungary in terms of the entrepreneurial sub-indexes and the GEINDEX

Global Entrepreneurship Index

Hungary

R2 = 0,7956

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

0,80

0,90

0 10000 20000 30000 40000 50000

GDP PPP 2007-2008 average

Entrepreneurial Attitudes Sub-index

Hungary

R2 = 0,5645

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

0,80

0,90

0 10000 20000 30000 40000 50000

GDP PPP 2007-2008 average

Entrepreneurial Activity Sub-index

Hungary

R2 = 0,6525

0,00

0,20

0,40

0,60

0,80

1,00

1,20

0 10000 20000 30000 40000 50000

GDP PPP 2007-2008 average

Entrepreneurial Aspiration Sub-index

Hungary

R2 = 0,7434

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

0,80

0 10000 20000 30000 40000 50000GDP PPP 2007-2008 average

The relative position of Hungary in the indicator level

Components of Entrepreneurial Attitudes Sub-index (normalized scores)

OPPORTSIZE SKILEDUC NONFAIRRISK KNOWNET CARSTATCORHungary 0,025 0,475 0,644 0,236 0,32033% percentile 0,296 0,368 0,358 0,203 0,30667% percentile 0,566 0,553 0,701 0,396 0,608

Components of Entrepreneurial Activity Sub-index (normalized scores)

TEAOPPORT TECH SECTORQUALITY OF HUMAN

RESOURCES COMPETFREEHungary 0,582 0,263 0,432 0,41633% percentile 0,431 0,255 0,326 0,41567% percentile 0,767 0,489 0,526 0,605

Components of Entrepreneurial Aspirations Sub-index (normalized scores)

NEWPROD NEWTECH HGROWTHSTRAT INTERNAT RISK CAPITALHungary 0,116 0,292 0,183 0,467 0,01433% percentile 0,103 0,199 0,300 0,390 0,10067% percentile 0,322 0,485 0,498 0,631 0,338

INSTITUTIONAL

VARIABLES INDVIDUAL VARIABLES

INDICATORS

MARKETSIZE 0,433 OPPORTUNITY 0,086 OPPORTUNITY PERCEPTION 0,025

EDUC 0,692 SKILL 0,343 STARTUP SKILLS 0,475

CRR 0,667 NONFEAR 0,808 NONFEAR OF FAILURE 0,644

INTERNETUSAGE 0,373 KNOWENT 0,132 NETWORKING 0,236

EN

TR

EPR

EN

EU

RIA

L

AT

TIT

UD

ES

CPI 0,446 CARSTAT 0,251 CULTURAL SUPPORT 0,320

DB 0,743 TEAOPPORT 0,416 OPPORTUNITY STARTUP 0,582

TECHAVAILABLE 0,445 TECHSECT 0,260 TECH SECTOR 0,263

HDI 0,797 HIGHEDUC 0,428 QUALITY OF HUMAN RESOURCE 0,432

EN

TR

EPR

EN

EU

RIA

L

AC

TIV

ITY

FREEDOM 0,500 COMPET 0,232 COMPETITION 0,416

GERD 0,213 NEWP 0,132 NEW PRODUCT 0,116

INNOVCAT 0,444 NEWT 0,313 NEW TECHOLOGY 0,292

BSS 0,406 GAZELLE 0,124 HIGH GROWTH 0,183

GLOB 0,835 EXPORT 0,392 INTERNATlONALIZATION 0,467

EN

TR

EPR

EN

EU

RIA

L

ASP

IRA

TIO

NS

VENTCAP 0,380 INFINV 0,005 RISK CAPITAL 0,014

INSTITUTIONS 0,527 INDIVIDUAL 0,280 GEI 0,294

Effect of crisis on nascent and new businesses

Start-up more difficult Growing business more difficult Fewer opportunitiesFactor driven

Efficieny driven

Innovation driven