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Entrepreneurship and country-level innovation: investigating the role of entrepreneurial opportunities

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Abstract

Since the work of Schumpeter, entrepreneurship has been regarded as a concept that is in close relation to innovation. However, recent country level investigations show that technology innovation and new business creation can be regarded as two separate phenomena. In this paper we provide an explanation for the above contradiction through the distinguishing between two types of entrepreneurship, necessity and opportunity entrepreneurship. Building on opportunity theory and rational choice theory, we investigate the influence of both types of entrepreneurship on country-level innovation, and furthermore, pay particular attention to the interaction between opportunity entrepreneurship and the amount of opportunities available. We find that necessity entrepreneurship is inversely related to country-level innovation, whereas opportunity entrepreneurship is positively linked to technological progress. The positive effect of opportunity entrepreneurship, however, diminishes with an increased amount of entrepreneurial opportunities. This interaction indicates that opportunity availability is an important element of a country’s entrepreneurship environment.

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Notes

  1. This is foremost true for the earlier works of Joseph Schumpeter which are sometimes referred to as Schumpeter mark I. The authors are aware that in his later works Schumpeter increasingly acknowledged the meaning of large and established companies for innovation. As this paper is focused on entrepreneurship it is taking the Schumpeter mark I perspective in order to differentiate Schumpeterian entrepreneurship characterized by innovation from non-innovative types of entrepreneurship (e.g. Kirznerian). Thus, Schumpeter mark II is not taken into consideration. This, however, should not be regarded as conflictive as in both perspectives “entrepreneurial activities play an active role in understanding the dynamics of innovation…” (Hagedoorn 1996, p. 883).

  2. It is worth noting that GEM surveys allow for choosing a different motivation than opportunity and necessity (Reynolds et al. 2002). Therefore, necessity and opportunity entrepreneurship indeed catch the vast majority of entrepreneurship activities in a country but cannot mirror the whole entrepreneurship landscape (Reynolds et al. 2002). Due to the circumstance that in some countries significant shares of entrepreneurs indicated neither necessity nor opportunity entrepreneurship as the main motivation, we do not treat the two dimensions as exclusive but investigate both of them in order to get a clearer picture of a country’s entrepreneurship structure.

  3. Using the absolute value of necessity/opportunity entrepreneurship might lead to biased results. Research has shown that opportunities vary in their quality as they encompass both imitative/arbitrage and innovative opportunities (Shane 2009; Anokhin and Wincent 2012). Thereby, in countries with traditionally low shares of opportunity entrepreneurship (e.g. least developed and developing countries), opportunities are expected to be of an inferior quality (Acemoglu et al. 2006; Anokhin et al. 2011; Anokhin and Wincent 2012) as entrepreneurs come with simple businesses in the form of arbitrage opportunities rather than innovative opportunities. The relatively low meaning of high quality opportunity entrepreneurship in those countries, however, is diluted by multiplying it with the total entrepreneurial activity which is traditionally high in least developed countries. To give a more realistic picture of the opportunity entrepreneurship landscape we take into account the relative prevalence of necessity/opportunity entrepreneurship instead of the absolute value.

  4. World Bank reports data for the years 2012 and 2013. In case data were available for both years the average figure is taken.

  5. E.g. the higher the quality of the institutional business framework, the higher the ranking position of a country and thus the smaller the measure used. For example, the country with the lowest ranking position in the analyzed period is Angola, which ranked 151st in 2012 and 153rd in 2013 (average: 152). The country with the highest ranking is Singapore which ranked 1st in 2012 and 2013.

  6. Controlling for the lagged values of Y.

  7. Controlling for the lagged values of X.

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Authors and Affiliations

  1. Chair for Entrepreneurship and Innovation Management, Technische Universität Berlin, Straße des 17. Juni 135, H76, 10623, Berlin, Germany

    Matthias Mrożewski & Jan Kratzer

Authors
  1. Matthias Mrożewski
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  2. Jan Kratzer
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Corresponding author

Correspondence to Matthias Mrożewski.

Appendices

Appendix 1: Year-to-year correlations of GCI Innovation measures for the years 2006/2007–2013/2014

 

GCI2006/2007

GCI2007/2008

GCI2008/2009

GCI2009/2010

GCI2010/2011

GCI2011/2012

GCI2012/2013

GCI2013/2014

GCI2006/2007

1

       

GCI2007/2008

.992**

1

      

GCI2008/2009

.985**

.992**

1

     

GCI2009/2010

.978**

.977**

.991**

1

    

GCI2010/2011

.977**

.972**

.981**

.992**

1

   

GCI2011/2012

.969**

.965**

.971**

.978**

.990**

1

  

GCI2012/2013

.952**

.952**

.958**

.962**

.971**

.986**

1

 

GCI2013/2014

.940**

.936**

.937**

.947**

.956**

.974**

.990**

1

  1. ** Significant at 0.1 %

Appendix 2: Entrepreneurial opportunity availability across countries

Measured by the GEM indicator “Perceived opportunities”: percentage of the working age population (18–64 years) who see good opportunities to start a firm in the area where they live, averages 2001–2012.

figure a

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Mrożewski, M., Kratzer, J. Entrepreneurship and country-level innovation: investigating the role of entrepreneurial opportunities. J Technol Transf 42, 1125–1142 (2017). https://doi.org/10.1007/s10961-016-9479-2

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