Entrepreneurship at the heart of national advantage

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Entrepreneurship is recognized as being of fundamental importance to our economy (Bruyat and Julien, 2000). Entrepreneurship is widely discussed in the academic literature, but still there is a problem defining to word "entrepreneurship". Different studies indentify different characteristics. Two dominant positions are currently indentified on entrepreneurship. Richard Cantillon (c. 1680 - 1734) and later Schumpeter (c. 1883 - 1950) laid the foundation for one of the dominant position (Bruyat and Julien, 2000; Hébert and Link, 1989), which is based on the idea that entrepreneurship must involve risk-taking individuals who start new ventures that are innovative and experience rapid growth. The other dominant position represent the idea the entrepreneurship in to be the domain of owner-managers who organizes production and production factors (Gartner, 1990; Bruyat and Julien, 2000). Because different meanings for entrepreneurship exist and various themes of entrepreneurship expresses seems to reflect different parts of the same phenomenon, it is important to make explicit what we are talking about when we talk about entrepreneurship. For this thesis a distinction is being made between an entrepreneur and a small business owner. An entrepreneur is an individual who establish and manage a business for the principal purpose of profit and growth and who is characterized by innovative behavior. The small business owner is an individual who establish and manages a business for the principal purpose of furthering personal goals. The business must be the primary source of income and will consume the majority of one's time and resources (Carland et. Al., 1984). In the literature the main distinction between the two is innovation as the main characteristic of an entrepreneur, while the common factor self-employment is.

Self-employment is being seen as the simplest kind of entrepreneurship (Blachflower, 2000). In the literature there aren't many different views on self-employment. The organization for Economic Co-operation and Development (OECD) defines self-employment is individuals who perform work for profit or family gain, in cash or in kind (Le, 1999). There is a differentiation according to the reasons that motivate self-employment. Thurik et al. (2008) links these motives to unemployment. The two effects unemployment on self-employment are called the refugee effect and the entrepreneurial effect. The refugee effect is when an individual is pushed into self-employment because all other options for work are either absent or unsatisfactory. The entrepreneurial effect is when an individual wants to exploit a perceived business opportunity. In the Global Entrepreneurship Monitor (GEM) report of 2006 these self-employed are called opportunity entrepreneurs and necessity entrepreneurs. In the Netherlands 91% of the early stage entrepreneurs are opportunity entrepreneurs to 6% necessity entrepreneurs. For those who are pulled into entrepreneurship, two major drivers of opportunity entrepreneurship can be identified: those who are pulled primarily because they desire independence, and those who are primarily pulled to entrepreneurship because they want to increase their income as compared to, for instance, being an employee. In addition to paid employment, the availability of social security could be an underlying factor (van Stel et al., 2007).

2.2 Role of entrepreneurship in the economy

For a long time the academic field neglected entrepreneurship as a field of research. The focus was on the big companies and their role in the economy. The last decades the role of the entrepreneur has grown. It has become more important for the economic growth and innovation (Wennekers and Thurik, 1999; van Stel, Carree and Thurik, 2005; van Praag, 2005). But earlier entrepreneurship seemed to yield for the "big businesses". In the post-war period of last century the large enterprise was the dominant form of business organization. This was the era of mass production when economies of scale seemed to be the decisive factor in dictating efficiency. Small firms and entrepreneurship were viewed as a luxury, as something Western countries needed to ensure a decentralization of decision making, obtained only at the cost of efficiency (Audretsch and Thurik, 2004). From the 1970s on the trend of centralization ceased and the share of employment in small enterprises began the increase (Loveman and Sengenberger, 1990). The shift of stability, homogeneity and scale to flexibility, diversity and novelty is widely discussed in scientific literature. Parker (2001) states that the technological changes have transformed production in modern economies by expanding the possibilities for flexible and decentralized production techniques. There has been an associated increase in the role of knowledge and the importance of product and process innovation. Audretsch and Thurik (2004) are adding globalization as a major factor to the revival of the small businesses.

More recent, Wong et al. (2005), Wennekers and Thurik (1999) and Wennekers et al. (2005), did extensive research on linking entrepreneurship and economic growth. These studies shows that two major roles of entrepreneurship could be singled out in linking entrepreneurship to economic growth. The first is new business creation. The link between economic growth and new business creating is twofold. New businesses creating change, competition en enhancing rivalry by reestablishing market equilibrium. This can be accomplished by entering new or existing markets with new or existing goods or services. On the other hand new businesses are the source for the majority of new jobs created (Wong et al., 2005). As discussed in the first paragraph this linked to the reduction of unemployment according either to the refugee or entrepreneurial effect. Due to the low survival and growth rates the contribution in reducing unemployment would be limited. Birch et al. (1997, in Wong, 2005 p. 345) supports this in their research. Empirical evidence shows that especially fast growing, or high-growth potential start-ups, significantly contribute to economic growth and particularly to job creation, rather than new firm formation in general.

The second link between entrepreneurship and economic growth is through newness or innovating entrepreneurship. Innovation is one of the major factors in creating new knowledge and technologies. Globalization is increasing and competitive advantages of economies are shifting to knowledge bases activities. Hereby entrepreneurship is playing a major role in generating economic growth through commercializing knowledge spillovers (Wennekers et al. 2005). Wennekers & Thurik (1999) state that newness through start-ups and innovation and competition are the most relevant factors in linking entrepreneurship to economic growth.

2.3 Entrepreneurship in the Netherlands