Summary
Recent studies have shown that the contribution of small firms to employment and GDP is increasing. A large amount of work has also established the significance of social and economic variables for entrepreneurial decisions. Very little is known, however, about how government policies and programs influence entrepreneurial activity, and whether these effects are consistent across countries. Using original data from a representative sample of 10,000 individuals and from more than 300 open-ended interviews in 10 countries, this article provides some suggestive evidence that government intervention aimed at enhancing the underlying environment of entrepreneurial decisions may be more effective than intervention designed to provide safety nets.
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Extract
A Cross-Country Assessment of Government Intervention and Entrepreneurial Activity
In recent years, several studies have provided significant evidence on the ability of smaller and entrepreneurial firms to create employment and contribute to economic development and growth (Acs et al. 1999; Baumol 2002; Birch 1987). New and small firms constitute more than 99 percent of all firms in almost all advanced countries, and their share of employment and contribution to the Gross Domestic Product is increasing (OECD 1996; Carrée andThurik 2003). Acs et al. (1999) and Wennekers and Thurik (1999), among others, have shown that, in recent years, the role played by entrepreneurship in productivity and GDP growth has expanded significantly. In fact, entrepreneurship is now acknowledged as a major source of economic growth and many governments and international organizations have launched initiatives for the support and development of the entrepreneurial sector.1
Within this context, a sizable amount of empirical work has established the significance of both social and economic variables in determining entrepreneurial decisions. Among others, Evans and Jovanovic (1989), Evans and Leighton (1989), and Kihlstrom and Laffont (1979) have discussed the importance of financial resources and constraints on entrepreneurial decisions. Iyigun and Owen (1998), Murphy et al. (1991), and Otani (1996) have discussed issues related to the allocation of human capital. Bogenhold and Staber (1991), Blanchflower and Oswald (1988), and Hamilton (2000) have studied the importance of employment status and labor markets on entrepreneurial decisions. Finally, Amit et al. (1995) have focused on individuals' opportunity costs when choosing between alternative income-producing activities. The complementarities between many of these works have drawn attention to the fact that entrepreneurial decisions are the outcome of a multilayered and complex process and that understanding the sequence of actions required to start a new firm is, to a large extent, contingent upon the context in which they are taken (Jacks and Anderson 2002).Very few studies, however, have tried to establish how, if at all,...See the full content of this document
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