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The Measurement of Entrepreneurial Activity
| Content Provider | Semantic Scholar |
|---|---|
| Author | Castro, Julio O. De Maydeu, Alberto Justo, R. Ribeiro |
| Copyright Year | 2005 |
| Abstract | In this paper we re-examine the measurement of entrepreneurial activity and provide a model-based approach at measure. The Global Entrepreneurship Monitor (GEM) project has been a key addition to our ability to measure and compare rates of entrepreneurial activity. But even though there is consensus about the importance of measuring entrepreneurial activity, researchers differ about the appropriate ways to measure the breadth of entrepreneurial activity. We analyze the GEM’s measure of entrepreneurial activity (TEA), address limitations in its design and development and provide an alternative measure of entrepreneurial activity, which includes entrepreneurial environment. We use a model-based approach to measure entrepreneurship activity and our results indicate that the model provides support for the combined use of entrepreneurial activity and entrepreneurial environment. Key-Words EntrepreneurshipEntrepreneurial ActivityEntrepreneurial Environment IE Working Paper GE8-102-I 10 01 2005 Measuring the amount and impact of new venture creation and entrepreneurial activities within and across different societies has been an important concern within the entrepreneurship literature. The measurement of entrepreneurial activities also has significant implications for our understanding of the nature and breadth of entrepreneurship in society, both from a perspective of research and from the perspective of public policy (Birley, 1984; Haswell & Holmes, 1989; Laitinen, 1992; Williams, 1993; Dennis, 1997; OECD, 1998; Verheul et al., 2002). Many scholars have argued for a link between entrepreneurial activity and economic development of societies, but the measurement of such link needs to be based on adequate measures of new venture creation and entrepreneurial activities. One such instrument is the Global Entrepreneurship Monitor (GEM), which both attempts to provide measures of entrepreneurial activity and to ascertain the relationship between entrepreneurial activities and economic development. GEM provides a significant addition to researchers’ ability to assess the impact and extent of entrepreneurial activity. But even though there is consensus about the importance of measuring entrepreneurial activity, researchers differ about the appropriate ways to measure the breadth of entrepreneurial activity. In this paper we conceptually analyze the nature and measurement of entrepreneurial activity, re-examine the measurement of entrepreneurial activity in the GEM project, and provide a model based approach at measuring it. In particular, we re-examine the GEM measure of entrepreneurial activity (TEA), address limitations in its design and development and provide an alternative measure of entrepreneurial activity. Finally, we incorporate into our theoretical model entrepreneurial environment, a variable that should be taken into account along with entrepreneurship activity per se, and that should help provide a strong indicator of the pervasive effects of entrepreneurial activity. THE MEASUREMENT OF ENTREPRENEURIAL ACTIVITY While there is consensus in the literature about the need to measure new venture creation, entrepreneurial activity, and its impact on the wealth of societies, there is no consensus about how to measure it and of the adequacy of the measures utilized in research. Scholars have indeed proposed a broad array of different definitions and measures (Hébert and Link, 1989; Gartner, 1990; Praag, 1999; Shane and Venkataraman, 2000; Davidsson, 2004). Of particular importance are the concerns raised by researchers regarding the undercounting of new firms entries and exits in the market, and the effect of this undercounting on the assessment of the impact of entrepreneurial activities (Dennis 1997, 1999; Williams, 1993; Bates 2004; Davidsson, 2004). Dennis (1997, 1999) attributes the problems of measurement of new entries in particular to the undercounting of small business and the methodological approaches utilized at measuring business entries and exits. His concern about the most common methodological approaches utilized and the opportunities they present for miscounting entries and exits are IE Working Paper GE8-102-I 10 01 2005 2 consistent with the concerns raised by Williams (1993) and Birley (1984). In particular they contend that government surveys such as census data, and private sector surveys, such as the Dunn and Bradstreet data are prone to miscounting entries and exits because of the methodological approaches utilized for collecting the data. But researchers also have questioned the definition of what constitutes entrepreneurship. Gartner and Scott (1995) have argued that understanding what is being measured also is an important issue for scholars, and could significantly alter the outcome with respect of the measure of entrepreneurial activity. In particular they address the issue of time frame and the expectation that behavior in a prior time frame is likely to reflect behavior in posterior times. They contend that one of the main problems with measurement of entrepreneurial activity is that is based on data that span relatively short time periods, which is contended to reflect historical as well as future behavior. Moreover, they contend that the determination of who is an entrepreneur is of great importance in terms of measurement, in particular if firm start up for self-employment is to be considered entrepreneurship or if only firms started with the prospect of value creation should be considered entrepreneurial. That difference has significant implications for the measurement of entrepreneurship, since a number of firms created with the purpose of creating self employment would not be considered entrepreneurial activity if the baseline was firm/value creation and the expectation of future growth. Final counts would vary significantly depending on the definition utilized. Finally and more importantly, is the fact that few measures of entrepreneurial activity include and reflect the environmental aspects and effects of entrepreneurship. This final issue is particularly important for the field and our study. Whereas the measurement of direct entrepreneurial activity is important, we believe that it is incomplete without the examination of the entrepreneurial environment and its impact on entrepreneurial activity and wealth creation. Similar to our argument is Van de Ven’s (1993) assertion that a research perspective that considers external environment conditions is appropriate for explaining entrepreneurship. In his article, he points to the fact that the study of entrepreneurship has long been dominated by the analysis of individual characteristics and behaviour of entrepreneurs, and considers that it is deficient without the inclusion of social, economic and political infrastructure for entrepreneurship. This point has been underlined by Gartner (1985), who proposed a model for the new venture creation process that highlighted the role of environment in the creation of new ventures. Gartner stated, “The existence of highly supportive environments can, from one perspective, be said to actually create entrepreneurs” (1985: p. 700). Variables affecting the entrepreneurial environment, according to Gartner, include venture capital availability, presence of experienced entrepreneurs, government influences, and availability of support services, among others. Gartner’s study originated in an important body of literature that focuses upon the relationship between venture creation and environmental conditions (Aldrich, 1990; Keeble and Walker, 1994; Gnyyawali and Fogel, 1994; Reynolds et al., 1994). Using an evolutionary perspective, Aldrich (1990) suggested that new venture creation could be influenced by intrapopulation, inter-population and institutional factors. IE Working Paper GE8-102-I 10 01 2005 3 Jackson and Rodney (1994) have talked about the importance of the adequate attitudinal climate for entrepreneurial activity. Their examination included both individual and environmental level variables such as willingness to accept risk, acceptance of failure, the importance accorded to new venture creation, the socialization children receive from their parents, and measures of the structure and performance of the local economy. The main insight we can derive from their study is the need to consider both individual and societal level variables when examining attitudes toward new venture creation. Dennis (1997) argues that one of the reasons for the numbers of new medium and small firms created in the US is the fact that few American institutions are as popular, drawing empathy from the American public. Moreover, he argues that this popularity, and thus the number of new business creations, is directly linked to most Americans being exposed to business ownership either directly or through someone they know. This familiarity with business ownership is, in his view, an important driver of new venture activity. Krueger, and Brazeal, (1994) discuss the importance of developing an “entrepreneurial potential” so that potential entrepreneurs can find the suitable conditions to develop their ideas. The authors state that: Despite a focus on the potential entrepreneur, we fully recognize that entrepreneurial activity does not occur in a vacuum... Implicit in this is the notion that the group, organization, or community possesses some potential for entrepreneurial activity. The environment need not be already rich in entrepreneurs, but has the potential for increasing entrepreneurial activity... Regardless of the existing level of entrepreneurial activity, such “seedbeds” establish fertile ground for potential entrepreneurs when and where they perceive a personally viable opportunity. That is, “entrepreneurial potential” requires “potential entrepreneurs. This idea of entrepreneurial potential is very akin to the arguments on entrepreneurial environments introduced in this paper. In a similar vein, several scho |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.latienda.ie.edu/working_papers_economia/WP05-01.pdf |
| Language | English |
| Access Restriction | Open |
| Subject Keyword | Amiga Walker Apnea monitor alarm type:Type:Point in time:Apnea monitor:Nominal Attitude Baseline (configuration management) Censuses David B. Fogel Economic Development Empathy Fertility Haswell (microarchitecture) Hospitals, Private Jackson Level design Opportunity management Pervasive informatics Small Business Socialization Societies Tea Theory United States Public Health Service Ven (currency) Walkers |
| Content Type | Text |
| Resource Type | Article |
