Linking Entrepreneurship
and Economic Growth
ABSTRACT. In the 1980s stagflation and high unemployment caused a renewed interest in supply side economics and
in factors determining economic growth. Simultaneously, the
1980s and 1990s have seen a reevaluation of the role of small
firms and a renewed attention for entrepreneurship. The goal
of this survey is to synthesize disparate strands of literature
to link entrepreneurship to economic growth. This will be done
by investigating the relationship between entrepreneurship and
economic growth using elements of various fields: historical
views on entrepreneurship, macro-economic growth theory,
industrial economics (Porter’s competitive advantage of
nations), evolutionary economics, history of economic growth
(rise and fall of nations) and the management literature on
large corporate organizations. Understanding the role of entrepreneurship in the process of economic growth requires the
decomposition of the concept of entrepreneurship. A first part
of our synthesis is to contribute to the understanding of the
dimensions involved, while paying attention to the level of
analysis (individual, firm and aggregate level). A second part
is to gain insight in the causal links between these entrepreneurial dimensions and economic growth. A third part is to
make suggestions for future empirical research into the relationship between (dimensions of ) entrepreneurship and
economic growth.
1. Introduction
Economic growth is a key issue both in economic
policy making and in economic research. In
Europe in particular, the interest in economic
growth is growing fast in view of the persistently
high rates of unemployment. In most OECD countries the first decades after World War II showed
historically high rates of economic growth.
Following the first oil crisis in 1973 a period of
Final version accepted on February 22, 1999
EIM Small Business Research and Consultancy,
The Netherlands and Centre for...