Martin Carree

The Impact of Entrepreneurship on Economic Growth

The present chapter deals with the consequences of entrepreneurship for macro-economic growth. It consists of eight sections: (1) Introduction; (2) The influence of economic development on entrepreneurship; (3) Types of entrepreneurship and their relation to economic growth; (4) The effects of the choice between entrepreneurship and employment; (5) Entrepreneurship in endogenous growth models; (6) Strands of empirical evidence; (7) The time lag structure; and (8) Conclusion.

Economic Development and business Ownership: An Analysis Using Data of 23 OECD Countries in the Period 1976-1996

In the present paper we address the relationship between business ownership and economic development. We will focus upon three issues. First, how is the equilibrium rate of business ownership related to the stage of economic development? Second, what is the speed of convergence towards the equilibrium rate when the rate of business ownership is out-of-equilibrium? Third, to what extent does deviating from the equilibrium rate of business ownership hamper economic growth? Hypotheses concerning all three issues are formulated in the framework of a new two-equation model. We find confirmation for the hypothesized economic growth penalty on deviations from the equilibrium rate of business ownership using a data panel of 23 OECD countries. An important policy implication of our exercises is that low barriers to entry and exit of businesses are necessary conditions for the equilibrium seeking mechanisms that are vital for a sound economic development.

Complementarity in R&D Cooperation Strategies

This paper assesses the performance effects of simultaneous engagement in R&D cooperation with different partners (competitors, clients, suppliers, and universities and research institutes). We test whether these different types of R&D cooperation are complements in improving productivity. The results suggest that the joint adoption of cooperation strategies could be either beneficial or detrimental to firm performance, depending on firm size and specific strategy combinations. Customer cooperation helps to increase market acceptance and diffusion of product innovations and enhances the impact ofcompetitor and university cooperation. On the other hand, smaller firms also face diseconomies in pursuing multiple R&D cooperation strategies, which may stem from higher costs and complexity of simultaneously managing multiple partnerships with different innovation objectives.

Impeded Industrial Restructuring: The Growth Penalty

This paper documents that a process of industrial restructuring has been transforming the developed economies, where large corporations are accounting for less economic activity and small firms are accounting for a greater share of economic activity. Not all countries, however, are experiencing the same shift in their industrial structures. Very little is known about the cost of resisting this restructuring process. The goal of this paper is to identify whether there is a cost, measured in terms of foregone growth, of an impeded restructuring process. The cost is measured by linking growth rates of European countries to deviations from the optimal industrial structure. The empirical evidence suggests that countries impeding the restructuring process pay a penalty in terms of foregone growth.

The relationship between economic development and business ownership revisited

This paper revisits the two-equation model of Carree, van Stel, Thurik and Wennekers (2002) where deviations from the ‘equilibrium’ rate of business ownership play a central role in determining both the growth of business ownership and that of economic development. Two extensions of the original set-up are addressed: using longer time series of averaged data of 23 OECD countries (up to 2004) we can discriminate between different functional forms of the ‘equilibrium’ rate and we allow for different penalties for being above or under the ‘equilibrium’ rate. The additional data do not provide evidence of a superior statistical fit of a U-shaped ‘equilibrium’ relationship when compared to an L-shaped one. There appears to be a growth penalty for having too few business owners but not for having too many.

Bias-corrected estimation in dynamic panel data models

This study develops a new bias-corrected estimator for the fixed-effects dynamic panel data model and derives its limiting distribution for finite number of time periods, T, and large number of cross-section units, N. The bias-corrected estimator is derived as a bias correction of the least squares dummy variable (within) estimator. It does not share some of the drawbacks of recently developed instrumental variables and generalized method-of-moments estimators and is relatively easy to compute. Monte Carlo experiments provide evidence that the bias-corrected estimator performs well even in small samples. The proposed technique is applied in an empirical analysis of unemployment dynamics at the U.S. state level for the 1991–2000 period.

TESTING THE CONVERGENCE HYPOTHESIS: A COMMENT

In a recent paper Lichtenberg (1994) proposes a test of the convergence hypothesis that the variance of productivity across countries decreases over time. He argues that the ratio of the variance in the first period to that in the last period of the time series is F-distributed but overlooks the dependency between these two variances. As a consequence, probabilities of committing a type II error of incorrectly rejecting the convergence hypothesis are large. This problem manifests most strongly in short time periods. Lichtenberg, for example, rejects the convergence hypothesis for a data set of 22 OECD countries over the 19601985 period.

The Productivity Effects of Internal and External R&D: Evidence from a Dynamic Panel Data Model

We examine the impact of internal and external R&D on labor productivity in a 6-year panel of Dutch manufacturing firms. We apply a dynamic linear panel data model that allows for decreasing or increasing returns to scale in internal and external R&D and for economies of scope. We find complementarity between internal and external R&D, with a positive impact of external R&D only evident in case of sufficient internal R&D. These findings confirm the role of internal R&D in enhancing absorptive capacity and hence the effective utilization of external knowledge. The scope economies due the combination of internal and external R&D are accentuated by decreasing results to scale at high levels of internal and external R&D. The analysis indicates that on average productivity grows by increasing the share of external R&D in total R&D.

Small firms and economic growth in europe

Economic activity in manufacturing industries moved away from large firms toward small firms in many Organization for Economic Cooperation and Development countries during the last two decades. However, the speed of this industrial transformation process has varied considerably across countries. This paper investigates the consequences of lagging behind in this restructuring process in manufacturing. A sample of 14 manufacturing industries in 13 European countries has been constructed for this purpose. It is found that, on average, the employment share of large firms in 1990 has a negative effect on output growth in the subsequent four-year period. This provides support for specific policies introduced during the 1980s in European countries stimulating small enterprises.

Accessing Resources from Innovation Partners: The Search Breadth of Family SMEs

This study investigates differences in the diversity of cooperation partners used for innovation‐related activities (i.e., search breadth) between family and nonfamily small and medium‐sized enterprises (SMEs), as well as within the group of family SMEs. The results generally confirm our hypotheses derived from the behavioral theory of the firm. Specifically, we show that family SMEs have a lower search breadth than their nonfamily counterparts. Our findings further illustrate how attributes of the CEO (level of education) and the top management team (nonfamily management involvement and educational background diversity) relate to the search breadth of family SMEs.