Technological Determinants of Entrepreneurship: Challenges for the European Public Policies

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The Future for Entrepreneurship and SME Policies in European Countries. Technological Determinants of Entrepreneurship: Challenges for the European Public Policies. João Leitão. University of Beira Interior. May 5th, Stockholm , Sweden. Outline. Motivation Objectives - PowerPoint PPT Presentation

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  • Technological Determinants of Entrepreneurship: Challenges for the European Public Policies

    Joo Leito

    The Future for Entrepreneurship and SME Policies in European CountriesMay 5th, Stockholm, SwedenUniversity of Beira Interior

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • OutlineMotivationObjectivesEntrepreneurship LiteratureLinking Neglected DeterminantsEconometric MethodologyResultsDiscussion and Final RemarksPolicy Implication and Future ResearchPublic Policies for Fostering Entrepreneurship

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • MotivationInformation and Communication Technologies (ICTs) have had substantial impacts on economic performance and on the success of individual firms (OECD 2004).

    Foreign Direct Investment (FDI) is considered as a strategic action for promoting Entrepreneurship (Parker 2006).

    Economic level: the spillover effect intensifies the competition, the entrepreneurial innovation capacity, and the research and development (R&D) intensity.

    Social level: the enhancement of knowledge spillovers and the reduction of social exclusion.

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • ObjectivesTo investigate whether the FDI has a significant economic impact on the one of the most important technological drivers: the ICTs. To make a comparative analysis between two European cases: Finland and Portugal.

    To analyze the causality relationships established among Business Ownership Rate (BOR), Gross Domestic Product (GDP), Unemployment (UNEMP), inward Foreign Direct Investment (FDI) and Investment in ICTs (IICT).

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Entrepreneurship Literature: Where do we stand?

    The policy-maker should be interested primarily in what determines the supply of entrepreneurship and in the means that can be used to expand it (Baumol 1968:69).

    The knowledge commercialization can be pre-empted through the knowledge filter (Audretsch & Stephan 1999; Audretsch & Lehmann, 2005).

    The attraction of inward FDI plays an important role, since MNCs impact indigenous entrepreneurial activity (Acs et al. 2006).

    The awareness of foreign technologies should be, actively, promoted by governments (Brezneitz 2007).

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Linking Neglected Determinants: Why should we care about the feedback?

    ICTs: The technological catalyst that promotes economic growth through a dynamic process of creative destruction based on technological innovations (Gershuny & Miles 1983; Barras 1986, 1990; Evangelista 2000; Metcalfe & Miles 2000; Andersen et al. 2000; Devezas 2005).

    FDI: The investment push that has an highly valuable learning effect on the host economies. The networking, the new organizational methods and the business management methods are critical for realizing the entrepreneurship potential of the host economies (North 1994; Ericsson & Irandoust 2001; Backer & Sleuwaegen 2003; Aleluia & Leito 2009).

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Linking Neglected Determinants: Why should we care about the feedback?

    The impact of first foreign investment is, in general, positive, but the marginal impacts of additional investments appears to be negative (Barbosa & Eiriz 2007).

    Limitation revealed by the authors: the weak evidence on positive effects of MNCs on entrepreneurial activity might hide a relevant impact of MNCs on industrial reorganization.

    The Schumpeterian mechanism for replacing inefficient firms by other more efficient, deserves to be further explored, especially by linking the so far neglected triple-mix of ICTs, inward FDI and Entrepreneurship.

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Econometric MethodologyWe consider four sequential steps:

    (i) the selection of an initial model specification(ii) the study of the integration order of the variables(iii) the estimation process of the CVAR model(iv) the dynamic analysis

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Results

    FINLAND2 Years3 Years10 Years

    (FDI, BOR)FDI - > BOR*VDC2,42E-051,8157,483-IRF-1,56E-06-0,0005-0,005BOR -> FDI*VDC17,65413,18814,164+IRF1002,636520,526333,424(IICT, GDP)IICT - > GDP*VDC0,1293,3215,136+IRF-14,34574,739555,212GDP -> IICT*VDC7,69615,45636,087-IRF-1,60E+08-5,10E+08-4,07E+09(FDI, UNEMP)FDI ->UNEMP*VDC2,0819,3267,241+IRF0,1920,6672,260UNEMP -> FDIVDC0,8260,7192,891-IRF-267,294-127,125-775,012(IICT, FDI)IICT -> FDIVDC1,8581,7101,461+IRF-307,669-79,338433,639FDI -> IICT*VDC84,2269,3047,58-IRF-8,85E+08-1,41E+09-5,00E+09

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Results

    PORTUGAL2 Years3 Years10 Years

    (IICT, UNEMP)IICT -> UNEMPVDC0,0300,9561,288-IRF0,010-0,093-1,132UNEMP -> IICT *VDC13,7209,45116,255+IRF3,59E+104,62E+106,15E+10(IICT, FDI)IICT -> FDIVDC0,0510,1131,515+IRF18,51146,024797,033FDI -> IICT *VDC3,0421,96613,087+IRF1,95E+101,65E+101,15E+10

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Discussion and Final Remarks:ICTs Pull

    Finland:ICTs pull for additional inward FDI, but the former does not impacts, in a significant way, on the later variable. This result reveals that investment in ICTs is a necessary condition but they are not sufficient to improve the national capability for attracting FDI.

    Portugal:An analogous situation is found. Although the increasing tendency observed, in terms of investment in ICTs, starting from the 80s until the end of 90s.

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Discussion and Final Remarks:FDI PushFinland:

    FDI impacts positively on the UNEMP. The impact is significant starting from the third period.

    FDI plays an important role as determinant of domestic entrepreneurship, since it contributes for decreasing values of entrepreneurial activity. This is justifiable by the dimension of firms and the high entry barriers that are associated with the dominant technological profile in high-tech activities.

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Discussion and Final Remarks:FDI Push (?)Portugal:

    FDI contributes for decreasing levels of UNEMP, but after the initial period of the MNCs operation, the efficiency pressure, the downsizing practices and the subsequent delocalization originate increasing levels of unemployment.

    We do not find empirical evidence for supporting the thesis that FDI is an effective determinant of Entrepreneurship. This is justifiable by the fact that the metric used for Entrepreneurship, that is, the BOR, is an exogenous variable.

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Discussion and Final Remarks:BOR FDI

    Finland and Portugal:

    For both countries was detected that BOR precedes inward FDI. From here, it results that inward FDI is fundamental to promote an entrepreneurial culture, because this provides a dynamic environment that will attract foreign investors.

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Discussion and Final Remarks:ICT - FDI

    Finland (high-tech producer): the FDI has a negative and significant impact on the investment in ICT. This reveals the growing importance of the private sector in assuring the level of investment in this technological catalyst.

    Portugal (low-tech producer): the FDI presents a positive and significant impact on the ICT. In the long term, the inward FDI plays an important role, especially if public policies aim to modify, in a progressive way, the national technological profile.

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Future Research and Policy ImplicationDeveloping longitudinal studies focused on the principal of entrepreneurial activity, that is, the entrepreneur, in order to study in what extent intellectual capital, social capital and organizational capital really matter in linking Entrepreneurship and FDI.

    Building on public policies focused on the creation and diffusion of ideas and products, and on the maintenance of an high degree of openness to new investors, especially in ICTs, because they are potential drivers of new waves of technological change.

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Public Policies for Fostering Entrepreneurship: A European Perspective

    by Leito & Baptista (2009), Springer, NY, US

    Part I Entrepreneurship Policies A European Framework

    Part II Entrepreneurship Policy in Countries and Regions

    Universidade da Beira Interior/Universidad de Extremadura/Universidad de Salamanca/Universidade de vora

  • Public Policies for Fostering EntrepreneurshipContributorsChap. 1 - Audretsch, Beckmann and Bnte discuss how policy programs promoting knowledge-based s