Abstract

While the link between entrepreneurship and economic growth has been the subject of considerable research interest during recent years (Carree & Thurik, 2003; van Stel, Carree, & Thurik, 2005), empirical inquiries into this effect have been constrained by lack of data. Most analyses have assumed a positive link between entrepreneurship and economic growth, but the evidence remains limited to cross-sectional data and simple OLS regressions at best. Other studies have suggested more complex relationships, arguing that a country’s level of economic development moderates (in a curvilinear fashion) the relationship (Acs, 2006). Rigorous tests of this notion remain equally scant, however, and again mostly based on cross-sectional data. We provide a longitudinal analysis on the effect of entrepreneurial activity on economic growth, using seven years of data from the GEM survey and distinguishing between three indices of entrepreneurial activity: Total Early Stage Entrepreneurship (TEA); High-Expectation Entrepreneurship (TEA); and the Anatomy of Entrepreneurship (rHEA). The GEM dataset is uniquely qualified for the study of this question, as it offers high-quality, internationally comparable micro-level data, which distinguishes between high-potential and low-potential entrepreneurial activity.

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