2.1 Importance and Measurement of National Subjective Well-Being
Creating a more entrepreneurial society with an institutional and societal framework that is conducive to high levels of subjective well-being has been one of the explicit goals on the European Union’s policy agenda for some time (European Commision,
2013). Ever since the United Nations’ General Assembly in 2011 called for a “more inclusive, equitable and balanced approach to economic growth that promotes the well-being of all people” (United Nations,
2012), many global leaders have helped to bring about a paradigm shift in the approach to socio-economic progress, initiating projects designed to bring psychological and subjective well-being to the forefront of societal goals. Subjective well-being accounts at the national level now complement traditional economic measures of progress and development (Diener et al.,
2010; Lyubomirsky et al.,
2005). Subjective well-being is an instrumental indicator of work-related productivity and effectiveness (Oswald et al.,
2015), business performance (Edmans,
2012; Harter et al.,
2010), individual creativity (Ceci & Kumar,
2016), job-related behaviors (Nikolova & Cnossen,
2020), and overall health and longevity (Lawrence et al.,
2015). This implies that subjective well-being indicators at the regional and national level capture the extent to which the population is healthy and productive, which has important immediate effects on health and prosocial behavior. In this context, well-being represents not only a key psychological goal of a nation, but also a key social, economic and political objective. At the same time, several authors (Blanchflower & Oswald,
2011; Stutzer,
2010; Nikolova et al.,
2020) in the field of happiness economics have emphasized that economic activity should not simply serve its own material welfare-related goals; rather, the value of economic activity should spring from its contribution to overall well-being.
An important challenge in scholarly research concerns the measurement of well-being. Several measurement instruments have been developed, ranging from subjective measures of affect, life satisfaction and psychological functioning to objective measures of physical health and social well-being (Wiklund et al.,
2019). The most common approaches to measuring the material welfare of an economy are the GNI per capita and GDP per capita (McGillivray,
2007), even though there has been increasing consensus that these indicators reflect a very narrow view of a country’s development and should include measurement of individuals’ well-being (Naudé et al.,
2014; Stiglitz et al.,
2009). Psychologists concur that well-being refers to optimal functioning and experience (Diener,
2009), which revolves around two distinct perspectives: hedonism and eudaimonism. A hedonic perspective equates (subjective) well-being with pleasure and happiness (Ryan & Deci,
2002), while a eudaimonic perspective on (psychological) well-being involves the cultivation of personal strengths and a contribution to the greater good in order to realize one’s true potential (Ryff & Keyes,
1995). At the national level, subjective well-being as an indicator has been most often captured as the degree to which people are satisfied with their lives and their jobs – the degree to which individuals judge the overall quality of their lives as favorable (Blanchflower & Oswald,
2011; Naudé et al.,
2013). Another aspect of national well-being is based on the evaluation of objective components of a good life, including economic indicators (i.e., income level, education level, health, social net and others) (Alatartseva & Barysheva,
2015). Although objective well-being differs conceptually from subjective well-being, objective well-being is indicative of subjective well-being (Western & Tomaszewski,
2016). This comes as no surprise because subjective well-being depends on an array of economic, social, political, cultural, institutional and other determinants (Fritsch et al.,
2019; Želinský et al.,
2018). Therefore, objective well-being measures represent the actual circumstances, while subjective measures of well-being reflect the actual experiences of people.
2.2 Entrepreneurial Activity and National Subjective Well-Being
On the individual level, entrepreneurship provides employment opportunities and opportunities for climbing the social ladder for those engaged in entrepreneurship, even those at the bottom (Sutter et al.,
2019). Entrepreneurship also creates good conditions to satisfy some basic psychological needs, especially the needs for self-determination and autonomy (Buttner & Moore,
1997; Gelderen,
2016; Nikolaev et al.,
2020), which may explain why entrepreneurs are on average more satisfied (Shir et al.,
2018) and healthier (Nikolova,
2019) than employees. Opportunity-driven entrepreneurs have been thought to enjoy higher levels of subjective well-being than necessity-driven entrepreneurs and employees (Binder & Coad,
2013; Larsson & Thulin,
2019). Recently, however, Amorós and colleagues (
2021) found that necessity-motivated entrepreneurs report similar levels of well-being as opportunity-motivated entrepreneurs.
On the market level, new and young companies help to satisfy market needs and create value through both innovation and imitation (Najda-Janoszka,
2014). Both innovative and imitative entrepreneurship are integral to competitive markets, as they improve existing products and services, lower their prices, make them more available to consumers and increase people’s standard of living in return.
Moreover, at the national level, new and young companies have proven to be short- and long-term job creators (Van Praag & Versloot,
2007), leading to a significant reduction in unemployment (Acs & Mueller,
2008; Block et al.,
2018; Thurik et al.,
2008). The relationship between unemployment and low well-being on the individual and national level has been well established. Unemployment affects the well-being of both the unemployed (McKee-Ryan et al.,
2005) and the employed (Clark et al.,
2010), possibly through the perception of poorer career prospects and higher job insecurity.
Finally, since entrepreneurial activity is often countercyclical, it helps to stabilize economies during economic downturns (Fritsch et al.,
2015). This is partly due to the fact that economic crises go hand in hand with high levels of unemployment, pushing individuals toward self-employment out of necessity (Aceytuno et al.,
2020). However, the role of opportunity-driven entrepreneurship during economic downturns is not to be underestimated, as these entrepreneurial ventures can create jobs during recessions (Devece et al.,
2016), while also providing necessary products and services to households, businesses and governments.
Individuals engage in entrepreneurial activity for one of two reasons: to act upon an identified opportunity or out of economic necessity. This motivation depends on determinants such as the individual-level characteristics of entrepreneurs (Cunningham & Lischeron,
1991; Mota et al.,
2019), the economic context in which the individuals live and work (Mota et al.,
2019; Schoonhoven & Romanelli,
2001), and the institutional environment (Amorós et al.,
2019; Galindo-Martín et al.,
2019). Because an individual’s motivation to become an entrepreneur affects entrepreneurship-related goals, venture performance and perceived subjective well-being (Hessels et al.,
2008), it is important to differentiate between opportunity- and necessity-driven entrepreneurship. At its core, opportunity entrepreneurship is related to improving one’s job characteristics and increasing one’s earnings relative to available employment. Therefore, it is not surprising that opportunity entrepreneurs enjoy high levels of well-being (Kautonen et al.,
2017; Wiklund et al.,
2019). Furthermore, research (Binder & Coad,
2013; Larsson & Thulin,
2019) has shown that the above-average level of subjective well-being among opportunity entrepreneurs can entirely explain the positive relationship between total entrepreneurship activity and subjective well-being. This may indicate that opportunity entrepreneurs and not necessity entrepreneurs might be the ones benefiting from entrepreneurship in terms of well-being.
Moreover, opportunity entrepreneurship implies a discovery and exploitation of unexploited or underexploited market opportunities. Opportunity exploitation results in supplying those products and services to the market that are especially valuable to customers, thereby creating value for customers and increasing their quality of life. Such ventures create more jobs and have higher growth potential than necessity-driven ventures (Devece et al.,
2016). In fact, the effect of entrepreneurship on economic growth can be attributed solely to opportunity entrepreneurship (Acs,
2006; Aparicio et al.,
2016), indicating that opportunity entrepreneurship may play a much more important role than necessity entrepreneurship in creating a successful economy and improving well-being.
In analyzing the determinants of subjective well-being at the national level, it is therefore important to differentiate between opportunity and necessity entrepreneurship, given that the relationship between entrepreneurship and national well-being may be attributed mostly or even entirely to opportunity entrepreneurship (Amorós & Bosma,
2014).
Innovation has an important place within the entrepreneurship literature. Theories of entrepreneurship suggest that entrepreneurship contributes to economic development and social change through innovation (Schumpeter,
1934) and that innovation is crucial in exploiting opportunities arising from changes in the environment (Drucker,
1985). Innovative entrepreneurship implies exploitation of unexploited opportunities. In the narrower sense (as defined by Global Entrepreneurship Monitor [GEM] for example), this means introducing new products or services to the market. However, in a broader sense, innovation includes introducing new methods of production, introducing different resources into production, innovating modes of conducting business, and creating new markets (Dekkers et al.,
2014). Only a smaller proportion of entrepreneurial activity is truly innovative entrepreneurial activity (Low,
2015). The nature of innovative entrepreneurship also differs between countries according to their economic development. In high-income countries, innovative entrepreneurship involves the invention of new products and the commercialization of new products, while in low-income countries, it tends to revolve more around improvements (Low,
2015).
Research has shown that innovative entrepreneurship has a positive and significant impact on economic growth (Szabo & Herman,
2012). Research has also found that successful innovative new ventures are the biggest job creators (Aulet & Murray,
2013; Henrekson & Johansson,
2010; Wong et al.,
2005). That being said, some researchers have suggested that the short- and medium-term effects of innovative entrepreneurship may differ from the long-term effects. Van Stel and Storey (
2004) explained that new firms may have negative short-term effects, but positive long-term effects on employment growth, as they put pressure on incumbent firms. Although Baptista et al. (Baptista et al.,
2008) found negative short-term effects, these were not statistically significant. The positive effect of entrepreneurship on employment growth was only evident years after initial entry. Tang and Koveos (
2004) even reported a negative relationship between the innovation index and economic growth in high-income countries, a result that corroborated that of Crudu (
2019). However, Andersson and colleagues (
2012) found support for positive long-term effects of entrepreneurship on productivity, although the immediate effects were negative. This suggests that many positive effects of innovative entrepreneurship occur several years after new firm entry.
As new and young innovative enterprises place competitive pressure on incumbents to increase their innovative endeavors (Aghion et al.,
2009), these competitive pressures can result in increased uncertainty and employment contraction, which in turn may decrease subjective well-being, at least in the short-term (Aghion et al.,
2016). However, in the long run, successful innovative new ventures are job creators (Dolan & Metcalfe,
2012) and contribute to the reduction of unemployment. Innovative companies may also create better jobs compared to other types of business ventures (Dolan & Metcalfe,
2012) and improve people’s well-being through access to better products and services (Hussinki et al.,
2019).
The breadth and wealth of entrepreneurial opportunities depend on the interplay among the macroeconomic environment, industry conditions and financial environment conditions (Cuervo,
2005 for a review). Van Stel et al. (
2005) suggested that the roles played by entrepreneurial activity vary for countries at different stages of economic development. Furthermore, institutions provide an overarching framework of behaviors that facilitate not only the discovery of entrepreneurial opportunities, but also their exploitation. Such institutional frameworks are reflected in the developmental differences between firms across contexts (Moran & Ghoshal,
1999). Overall, it is reasonable to conclude that various combinations of factors affect the level and quality of entrepreneurial activity across countries (Beynon et al.,
2016), and those patterns also influence the nature of the relationship between the level of entrepreneurial activity and level of subjective well-being at the national level. Consequently, it is important to consider and control for economic and institutional factors when examining this relationship.