Entrepreneurship and national economic growth: the European entrepreneurial deficit

We develop a quantitative model relating entrepreneurship, and economic growth, based on global competitiveness report and global entrepreneurship monitor data for 18 countries in the European Union, plus USA and China, for the years 2003-2005. The model is used to identify policy actions that can be undertaken to achieve the goals set forth in the Lisbon Agenda for the EU. Low GDP growth rates are associated with an entrepreneurial deficit. Higher levels of entrepreneurship need to be encouraged to commercialise the considerable knowledge and technology available in Europe. We find support for a model in which GDP growth is dependent on an exploitation bridge between independent entrepreneurs and corporate entrepreneurs in larger firms. The latter have the resources to mass market radical innovations developed by independent entrepreneurs and to capitalise on the technological spillover effects. In particular, opportunity-based entrepreneurs affect GDP by exploiting national investments in the commercialisation/innovation infrastructure.