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Entrepreneurship in the EU: survey Entrepreneurship in the EU: survey evidence at country levelevidence at country level

Isabel GriloEuropean Commission (DG Enterprise and Industry), Université catholique de

Louvain (CORE)

Instituto de Estadistica de Andalucia/Universidad de Huelva‘2nd workshop on entrepreneurship statistics’

17-18 November 2008, Hotel El Rompido-Golf, Huelva

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I will talk aboutI will talk about

• Eurobarometer

• Spain

• An example using the Eurbarometer 2004: Grilo, Thurik and van der Zwan, (Applied Economics, 2008)

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The seven entrepreneurial The seven entrepreneurial engagement levelsengagement levels

Have you started a business recently or are you taking steps to start one? “It never came to your mind"“No, you thought of it or had already taken steps to start a business but gave up"“No, but you are thinking about it"“Yes, you are currently taking steps to start a new business"“Yes, you have started or taken over a business in the last 3 years and still active"“Yes, you started or took over a business more than 3 years ago and still active" “No, you once started a business, but currently you are no longer an entrepreneur"

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Actual and Actual and never considerednever considered(Eurobarometer)(Eurobarometer)

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

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Mal

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Luxe

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Fran

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Den

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Ger

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Sw

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Italy

Hun

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Nor

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Many covariates includingMany covariates including

• Latent entrepreneurship

• Perception of administrative complexities

• Risk tolerance

• Perception of lack of sufficient information

• Perception of lack of financial support

• Demographics

• etc

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0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

Latv

iaS

love

nia

Mal

taLi

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Fran

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Den

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Actual and Actual and latentlatent entrepreneurship 2004 entrepreneurship 2004 (Eurobarometer)(Eurobarometer)

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Perception of administrative complexitiesPerception of administrative complexities(Eurobarometer)(Eurobarometer)

0,40

0,50

0,60

0,70

0,80

0,90

1,00

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Risk toleranceRisk tolerance(Eurobarometer)(Eurobarometer)

0,10

0,20

0,30

0,40

0,50

0,60

0,70

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Perception of lack of sufficient informationPerception of lack of sufficient information(Eurobarometer)(Eurobarometer)

0,200,250,300,350,400,450,500,550,600,650,70

Fin

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Perception of lack of financial supportPerception of lack of financial support(Eurobarometer)(Eurobarometer)

0,40

0,50

0,60

0,70

0,80

0,90

1,00

Fin

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Research program of DG enterprise Research program of DG enterprise jointly with EURjointly with EUR

• Multilevel• Actual versus latent• Seven engagement levels• Topics

– Two basic models– Developments over time– Eastern versus Western Europe versus US– Women– Dropouts– Necessity versus opportunity– Method and statistics

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What do we do?What do we do?

• different engagement levels 7

• individual data 20,000

• multi-level 26

• eclectic flavor 8 of more

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Determinants of entrepreneurshipDeterminants of entrepreneurship

• three giants (Schumpeter, Kirzner, Knight)

• economic theory (income choice)

• empirical literature

• our set-up

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Theory of income choiceTheory of income choice

• Ability - entrepreneurial efficiency– Jovanovic, 1982 and 1994; Lucas, 1978; Murphy, Shleifer and Vishny,

1991; Holmes and Schmitz, 1990 and Lazear, 2004

• Risk - risk attitudes– Kihlstrom and Laffont, 1979 and Parker, 1996 and 1997

• Liquidity constraints - polymorphe– Lucas, 1978; Jovanovic, 1982; Evans and Jovanovic, 1989 and Hurst and

Lusardi, 2004

• Eclectic add-ons– Bates, 1990; Blanchflower, 2004; Blanchflower and Meyer, 1994;

Blanchflower and Oswald, 1998; Blau, 1987; Douglas and Shepherd, 2002; Evans and Leighton, 1989 and 1990; Grilo and Irigoyen, 2005; Grilo and Thurik, 2005; Lin, Picot and Compton, 2000; Rees and Shah, 1986; Reynolds, 1997; Wagner, 2003 and Wit and van Winden, 1989

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Empirical literatureEmpirical literature

• gender, age, educational attainment• financial situation• employment status• experience• minority, immigrant behavior• family firm effects• attitudes• perceptions

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Empirical literatureEmpirical literature

• gender, age, educational attainment• financial situation• employment status• experience• minority, immigrant behavior• family firm effects• attitudes (preference; risk tolerance)• perceptions (adm. complexity; financial constraints)

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An example using Eurobarometer 2004An example using Eurobarometer 2004Van der Zwan, Grilo, Thurik (Applied Economics, 2008)Van der Zwan, Grilo, Thurik (Applied Economics, 2008)

• Aim– Disentangle the role of demographic and perception variables

and of country specific effects given that the entrepreneurial decision is a process of successive engagement levels

• Explaining the entrepreneurial ladder– 5 engagement levels

– 12,000 observations

– 26 countries

– 12 exogenous variables

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Entrepreneurship is a processEntrepreneurship is a process

• entrepreneurial ladder– steps: conception; gestation; infancy; adolescence; maturity;

decline

– one can jump or fall off– most don’t climb– climbing entails risks– the higher the more visible– one can climb down or climb again– the ladder industry is heavily regulated

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The seven entrepreneurial The seven entrepreneurial engagement levelsengagement levels

Have you started a business recently or are you taking steps to start one? “It never came to your mind"“No, you thought of it or had already taken steps to start a business but gave up"“No, but you are thinking about it"“Yes, you are currently taking steps to start a new business"“Yes, you have started or taken over a business in the last 3 years and still active"“Yes, you started or took over a business more than 3 years ago and still active" “No, you once started a business, but currently you are no longer an entrepreneur"

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The five entrepreneurial The five entrepreneurial engagement levelsengagement levels

Have you started a business recently or are you taking steps to start one? “It never came to your mind"“No, you thought of it or had already taken steps to start a business but gave up"“No, but you are thinking about it"“Yes, you are currently taking steps to start a new business"“Yes, you have started or taken over a business in the last 3 years and still active"“Yes, you started or took over a business more than 3 years ago and still active" “No, you once started a business, but currently you are no longer an entrepreneur"

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Ordered logit modelOrdered logit model

• yi* = Xi’β+ εi • yi* : unobserved propensity to become

entrepreneur• εi : uncorrelated, logistic distribution, zero mean

and variance π2/3 • Xi : vector of covariates, • Same β across observations i and engagement

levels

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Model evaluationModel evaluation

• Heteroskedastic disturbance terms: variance of • Parallel regression assumption (PRA)• Violation: impacts of variables change with

increasing level of engagement• Heteroskedasticity PRA

i

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Results (height of the steps)Results (height of the steps)

• Thinking taking steps: ‘difficult’

• Taking steps young business: ‘easy’

Implication: support for the TEA concept (GEM)

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Results (impact of covariates on Results (impact of covariates on engagement ladder)engagement ladder)

• Gender (men): ‘helps’ move up• Education: ‘helps’ move up• Self-employed parents: ‘helps’ move up• Risk tolerance: ‘helps’ move up• Preference for SE: ‘helps’ move up (strong)• Age: ‘helps’ move up iff ‘young enough’• Locus of control: no effect• Perception financial support: no effect• Perception administrative burden: ‘hinders’ move up• Spain, (Portugal, France, Belgium): ‘hinders’ move up

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Selected policy messagesSelected policy messages

• Results on age + aging society: urgency !!

• Administrative complexities: cut red tape and let them climb !!

• Think twice before spending tax payers’ money