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THE RELATIONSHIP BETWEEN ENTREPRENEURSHIP AND ECONOMIC GROWTH: KEY ISSUES

Автор: Tsatsenko N. A.

ECONOMICS / <<ШУШетиМ~^©УГМак>>#9(Ш,2©2©

УДК 330.354

Tsatsenko N.A. University of Siegen, Germany ORCID 0000-0002-4258-1865 DOI: 10.24411/2520- 6990-2020-11615 THE RELATIONSHIP BETWEEN ENTREPRENEURSHIP AND ECONOMIC GROWTH: KEY

Abstract

This study aims to investigate the relationship between entrepreneurship and economic growth based on the recent literature. The paper deals with different definitions of entrepreneurship and entrepreneur in order to better understand the link between entrepreneurship and economic growth. Furthermore, the sample of empirical papers is analyzed to reveal the impact of entrepreneurship on economic growth in developing and developed countries.

Introduction

Entrepreneurship is considered as one of the factor of economic growth. According to Schumpeter, entrepreneurship is the key vehicle to move an economy forward from static equilibrium based on the capabilities of combinatory to relation to entrepreneurial individuals [11]. Moreover, entrepreneur is determined as innovator [11]. Nevertheless, the answer to the question "How is entrepreneurship good for economic growth?" is not as simple as it seems at the first glance [1]. Nowadays the polemics about the relationship between en-trepreneurship and economic growth continues. There are wide-spread approaches to consider this issue.

The theoretical literature provides us the comprehensive overview about relationship between entrepre-neurship and economic growth. However, the empirical studies face the challenges to confirm theoretical hypothesis about the impact entrepreneurship on economic growth. One may suggest that the problem of measurement entrepreneurship and problem of new unstudied variables are reasons why we have weak evidences from empirics. Furthermore, the research area about the effect of the entrepreneurial on economic growth in developing countries has not been completely formed due to the lack of data. Besides, the research findings of developed countries may not be uniformly fitted in conditions of developing countries.

The purpose of this paper reviews is to examine the main results of researches about the relationship between entrepreneurship and economic growth based on the recent literature. The remainder of the paper is structured as follows. Section 2 reviews the various definitions of entrepreneurship and different role of entrepreneurs. Section 3 highlights the main aspects of the modern empirical papers. Finally, section 4 sets the conclusions.

Section 2: Characteristics of entrepreneurship and entrepreneur in the context of economic growth

The starting point is that entrepreneurship is the multi-dimensional concept. However, it is difficult to specify [3]. The definition of entrepreneurship had been introduced, developed and improved by different scholars. Note that the first key definition of entrepreneur has been provided by Schumpeter. Entrepreneur is described as innovator in economic life who introduces change under market [2]. According to Schumpeter, there are five characteristics of entrepreneurs such as the ability to introduce new methods of production; the ability to introduce and develop new goods; the ability to reveal new markets; the ability to use and exploit new sources of supply; the ability to identify business processes [11]. Further, we consider a few examples of interpretation role of entrepreneur in economic growth theory and highlight other scholar&s views about entrepreneurship (see Table 1).

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Summary of definitions about entrepreneurship and entrepreneur

Scholar Definition

Schumpeter [10] Entrepreneur as innovator. Entrepreneurship is defined as the vehicle to move an economy forward from static equilibrium based on the capabilities of combinatory to relation to entrepreneurial individuals.

Knight (seen from paper Braunerhjelm) [2] Uncertainty is key aspect of entrepreneurship and entrepreneur is individual who turn uncertainty into a calculable risk.

Kirzner [8] Entrepreneurship is the process of acting on a previously unnoticed profit opportunity. Entrepreneur is individual who spots unseen profit opportunities.

Holcombe [7] Entrepreneurship is the foundation of economic growth and its act build an environment within the framework which innovations create on themselves and leads to increasing productivity.

Wennekers and Thu-rik [16] Entrepreneurship is related to the manifest ability and willingness of individuals, on their own and their teams, inside and outside existing organisations to perceive and form new economic opportunities and represent their ideas in the market which may face of uncertainty and other barriers by making decisions on location and use of resources and institutions.

Gries and Naude [5] Entrepreneurship is determined as the resource, process and state of being via and in which individuals use the positive opportunity in the market.

Wong, P. K., Ho, Y. P., and Autio, E. [17] Entrepreneur is identified as agents of change, bring new ideas to the market and encourage growth via a competitive firm selection&s process.

focus on "the determinants" which foster entrepreneurial activity or to study "the effect of new business creation" [13]. It is important to mention that mostly researches at the cross-country level are occurred based on two well-known international comparable data sources, namely the Global Entrepreneurship Monitor and the World Bank Group Entrepreneurship Survey. In other words, these databases allow making the complex analysis and estimating entrepreneurial business activities across countries. For example, Total Early-Stage Entrepreneurial Activity is the main indicator of entrepreneurship in cross-countries analysis in the Global Entrepreneurship Monitor. The Table 2 reflects the finding from several empirical papers on this topic.

The empirical studies of the effect of entrepreneurial activities _on economic growth at the cross-country level_

Scholars Main Finding

Van Stel, A., Carree, M., and Thurik, R. [15] The Total Entrepreneurial Activities rate has a negative relationship with per capita GDP growth in low-income countries. It assumes the negative effect of entrepreneurship on economic growth can be explained by the lower level of human capital in low-income countries

Sternberg, R., and Wennekers, S. [12] The entrepreneurial activity has a positive effect on economic growth in highly developed countries, but a negative effect in developing countries. The result, that poorer countries fail to benefit from entrepreneurial activity, does not imply that entrepreneurship should be discouraged in these countries.

Valliere, D. and Peterson, R. [14] Entrepreneurship in developing countries is assumed to be different from developed countries "due to the effects of privatization and market liberalization policy implementation", also entrepreneurship culture. In developing countries, the positive effects of any high-expectation entrepreneurs are weakened by constrained access to the formal economy and the knowledge development infrastructure that it provides.

Ferreira, J. J., Fa-yolle, A., Fernandes, C., and Raposo [4] The entrepreneurship depends on the stage of economic development and therefore may reflect in either a positive or negative impact on the same economic strategy.

To summarize, entrepreneurship is now widely considered as the primary driver of sustainable economic growth and then entrepreneurs are determined as a person who builds new businesses, drives and creates innovation, introduces a new competition, accelerates structural change and makes the contribution to economy.

Section 3: Entrepreneurship and Economic Growth: from empirical evidences

The current stage of empirical knowledge on the relationship between entrepreneurship and economic growth shows that there are two main ways to study the impact of entrepreneurship on economic growth either

As we can see from table 2, the comparison between countries shows that entrepreneurship has different effects on economy so that the effect of entrepre-neurship on economic growth depends on the level of economic development. It means that this relationship

is more complex and shaped by many factors, especially the institutional ones. Hessels and Naude have presented the modern review about the intersection between the field of entrepreneurship and development economics [6]. It is assumed that the positive impact of

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ECONOMICS / <<ШУШетиМ~^©У©Мак>>#9(Ш,2©2©

entrepreneurship may be overestimated and at the same time their negative impact is likely to be underestimated. It could be explained by measurement weakness [6].

Moreover, there is huge debate about institutional factors and how they affect economic growth through entrepreneurial activity. The paper by Urbano et al. (2019) has made the contribution to this field. The paper provides new comprehensive syntheses of the literature over the last 25 years (from 1992 to 2016) concerning the interaction among entrepreneurship, institutions and economic growth [13]. It should be underlined that there are three important statements revealed based upon the previous studies [13]. Firstly, it is important to include institutions in the research in order to get better understanding factors which may form entrepreneurial activities. Secondly, the studying of the institutional environment is likely to give answer on the question why the effect of entrepreneurship on economic growth various across countries and regions. Thirdly, the complex chain from institution to economic growth through entrepreneurship still keeps some unexplored aspects of this interaction [9, 13].

4 Conclusions

Having considered the papers, several conclusion remarks could be formulated.

Firstly, the diversity of entrepreneurship reflects evolution of entrepreneurship as scientific field and shows the multi-dimensional concept of it. Secondly, the study of the relationship between entrepreneurship and economic growth is required to include institution as a new element in the analysis. Thirdly, for future studies it needs to draw special attention on country-specific institutional contexts.

Bibliography

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entrepreneurship economic growth economic development measurement empirical evidences new variables
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