Global Entrepreneurship Monitor 2008 The Netherlands

The Global Entrepreneurship Monitor (GEM) is a research program executed annually with the aim to obtain internationally comparative high quality research data on entrepreneurial activity at the national level. Over the years, GEM has expanded from 10 countries in 1999 to 43 countries in 2008. In this report, we focus specifically on entrepreneurial attitudes, activity and aspirations in the Netherlands. Hereby, we follow the entrepreneurial engagement ladder, consisting of latent entrepreneurship, earlystage entrepreneurial activity, established business activity and entrepreneurial exits. In order to measure earlystage entrepreneurial activity in a country, GEM developed the Total earlystage Entrepreneurial Activity rate. This rate includes both the prevalence of nascent entrepreneurs and that of owner-managers of young or new businesses. The group of nascent entrepreneurs refers to individuals within the adult population who are actively involved in their own new firm start-up, as full or part owner. The GEM data collection covers the complete life cycle of the entrepreneurial process. This cycle starts with personal assessments of attitudes and perceptions towards entrepreneurship. The life cycle continues with individuals who have the intention to start a business within the next three years (pre-nascent or prospective entrepreneurs). Next, the cycle refers to individuals at the point when they commit resources to start a business they expect to own themselves (nascent entrepreneurs), when they currently own and manage a new business that has paid salaries for more than three months but not more than 42 months (new business owners), and when they own and manage an established business that has been in operation for more than 42 months (established business owners). The aggregate of nascent entrepreneurship and young/new business entrepreneurship forms the TEA.

Institutions and Entrepreneurship: The Role of The Rule of Law

This paper examines variations in entrepreneurship across twenty developed countries, using three measures of entrepreneurship which we broadly describe as prestart, early-stage and established enterprises. It then links these measures to the economic institutional framework, holding constant a range of other factors. Two groups of conclusions emerge. The first is that the factors that influence pre-start, early-stage and established enterprises differ often quite sharply. Second, our results broadly confirm earlier work suggesting that social security entitlements, taxes, and employment protection legislation are negatively associated with (different forms of) entrepreneurial activity. However, our novel finding is that countries with a "better" rule of law have lower entrepreneurship. We explain this apparently counter-intuitive finding by arguing that in developed economies the benefits of the rule of law accrue primarily to large enterprises. �

The risk of growing fast

Are firm growth and firm survival related to each other? This paper tests the hypothesis that the relationship between firm growth and firm survival can be characterised by an inverted U-shaped relation. This hypothesis is confirmed by our estimations. At the same time, the results indicate that the top of the inverted U-shaped relation occurs at very high growth rates. This suggests that for the large majority of enterprises, the relationship between firm growth and firm survival can be better described by a positive relationship rather than an inverted U-shaped relationship. Although these results are preliminary, they suggest that policies that aim to increase the number of fast-growing firms have no negative effects on the rate of firm deaths.

Measuring Business Ownership Across Countries and Over Time: Extending the COMPENDIA Data Base

Since several years EIM Business and Policy Research maintains a data base on business ownership rates across OECD countries, called COMPENDIA (COMParative ENtrepreneurship Data for International Analysis). EIM harmonizes raw numbers of business owners (self-employed), as published in the OECD Labour Force Statistics, towards a uniform definition. We define the business ownership rate as the number of owner-managers of unincorporated and incorporated businesses, as a fraction of the total labour force. Until recently, data in COMPENDIA were published for a group of 23 OECD countries, starting from 1972 onwards. However, in the most recent version of the data base time series for seven additional countries have been introduced for the first time, so that the COMPENDIA data base now covers 30 OECD countries. The current paper makes four contributions. First, we provide an update of the methodology used to harmonize business ownership rates across countries. In doing so, as a second contribution, we provide two extended country cases (Poland and the United States) which illustrate the many methodological pitfalls that have to be dealt with when measuring the number of business owners. Third, we present business ownership time series for 30 OECD countries including the new countries in our data base: Czech Republic, Hungary, Korea, Mexico, Poland, Slovak Republic, and Turkey. Fourth and finally, we pay considerable attention to the sizable differences in the level and development of business ownership since 1989 in four Central and East European transition economies in our data base: Czech Republic, Hungary, Poland, and Slovak Republic. �

How does Entrepreneurial Activity Affect the Supply of Business Angels?

This paper examines the prevalence and the determinants of informal entrepreneurial investment activity (i.e. the 3 FFFs –friends, fools and family– and business angels), using a data set of more than 175,000 individuals – including some 4000 informal investors – in a large number of highly developed countries over the period 2002-2004. We distinguish between micro-level and macro-level determinants. The results uncover a positive virtuous circle where the demand for business angel finance tends to generate its own supply as a result of micro and macro factors. Our results also suggest that higher levels of entrepreneurial activity at the country level increase the probability that venture capital and business angel finance work in tandem with one another as complements rather than substitutes. Overall, the results uncover some important new relationships that perhaps provide some good news that market forces to some extent appear to naturally ameliorate equity gaps faced by entrepreneurs.

The two-way relationship between entrepreneurship and economic performance

This paper examines the two-way relationship between entrepreneurship and economic performance, using a harmonized data set covering 21 OECD countries in the period 1981-2006. While the relation between entrepreneurship and economic performance has been investigated extensively, most papers in this research field suffer from one or more methodological flaws, so that the important question: "does entrepreneurship cause economic performance?" can still not be answered up till the present day. In this paper we investigate the relationship in a Vector Error Correction Model (VECM) framework. We find evidence for the existence of a long-run equilibrium relation between the level of business ownership and per capita income. We also find evidence that increases in business ownership actually cause economic growth. However, our impulse response analysis reveals that the effect depends on the number of business owners already present in the economy, i.e. we find decreasing marginal returns to entrepreneurship. We also find that the effect depends on the size of the shock (i.e. the increase in entrepreneurship), where too big shocks may lead to negative effects on GDP due to 'overshooting'. �

What determines the volume of informal venture finance investment and does it vary by gender?

We estimate a two-equation model to jointly determine the number of informal investors and the amount of money that they invest over the last 3 years. Our model uses data on 126,189 individuals in 21 highly developed countries in the period 2002-2006. We delve deeper into the hypothesis of Burke et al (2010) that ‘the demand for informal venture finance tends to generate its own supply’. To our knowledge, we undertake the first research to move analysis of the supply of informal venture finance investment beyond estimating the propensity for a person to become an informal investor and onto the core concern which is the total volume of venture finance. We find that a one per cent increase in entrepreneurial activity increases the number of informal investors by 1.702 per cent. However, the average invested amount declines by 0.827 per cent leading to a net positive total increase by 0.861 per cent. This result indicates that, to a considerable extent, demand for informal investment creates its own supply. This effect is stronger for males than females. We also find that the level of venture capital investment has a net positive effect on the level of informal investment and that this effect is stronger for females than males.

Ambitious entrepreneurship, high-growth firms and macroeconomic growth

We examine the impact of ambitious entrepreneurship (entrepreneurs expecting to grow their firm) and high-growth firms (firms that have actually realized high growth rates) on subsequent macroeconomic growth in a sample of high and low-income countries, in the period 2002-2005. Our empirical evidence shows that once we control for the share of ambitious entrepreneurs the overall positive effect of entrepreneurship on macroeconomic growth disappears. Growthoriented entrepreneurship seems to contribute heavily to macroeconomic growth in both low- and high-income countries. In low-income countries, the overall positive effect of entrepreneurship on macroeconomic growth does not disappear after introducing the share of ambitious entrepreneurs into the statistical model. In contrast to ambitious entrepreneurship in nascent and young businesses, established high-growth firms do not seem to contribute to macroeconomic growth.These established high-growth firms seem to flourish in countries with high levels of entrepreneurship in general, while there appears to be no connection between the rate of high-growth firms and the share of ambitious entrepreneurs. �

Global Entrepreneurship Monitor 2009 The Netherlands

The Global Entrepreneurship Monitor (GEM) is a research program executed annually with the aim to obtain internationally comparative high quality research data on entrepreneurial activity at the national level. This academic research consortium started as a partnership between the London Business School and Babson College in 1999 and started with 10 participating countries in this same year. Over the years GEM has expanded to comprise 54 countries in 2009. Currently, GEM is the single largest study of entrepreneurial activity in the world. The GEM research program provides a harmonized assessment of the level of national entrepreneurial activity and conditions to which it is subject for all participating countries. The Netherlands has participated in GEM since 2001.

Ambitious Entrepreneurship, High-Growth Firms, and Macroeconomic Growth

This chapter examines the impact of ambitious entrepreneurship (entrepreneurs expecting to grow their firm) and established high-growth firms (firms that have actually realized high growth rates) on macroeconomic growth using a large sample of GEM data in high and low-income countries for the period 2002-2005. The empirical evidence shows that ambitious entrepreneurship accounts for the whole effect of entrepreneurship on macroeconomic growth but that this is not the case when low-income countries are considered. Also, in contrast to ambitious entrepreneurs, the chapter finds the contribution of established high-growth firms to macroeconomic growth to be negligible. No connection between their prevalence rates and the share of ambitious entrepreneurs is found