Does entrepreneurship and its motives have an impact on economic and employment growth? A Panel VAR analysis on EU-15 countries

Abstract: Entrepreneurship has historically played a major role on the growth of economies. Its impact on countries’ economic and employment growth has been theoretically as well as empirically studied. The literature indicates a clear positive relation of entrepreneurship to those macro figures. Nevertheless, new evidence discusses that more entrepreneurs do not always signify a quick growth rate. In the developing world, where entrepreneurial motives are fuelled by the necessity to avoid unemployment or poorly-paid job positions, entrepreneurship is insignificant for growth. On the contrary, the innovation-implementing opportunity-motivated entrepreneurship of the developed world has a positive impact on growth. One can argue that those assumptions are based on the study of wildly heterogenic study objects, which can easily support such a statement. Can the same assumptions be confirmed for a more homogenic study group? To explore that issue, data for the trajectory of GDP, employment, entrepreneurship, opportunity and necessity-motivated ratios for the EU-15 group of countries during the period of 2004-2015 have been drawn from Eurostat and the Global Entrepreneurship Monitor (GEM). As we find out, entrepreneurship does indeed have a positive impact on economic and employment growth. However, when controlling for the motives and separating the study objects in more and less developed member states, we find that entrepreneurship does not affect the economic growth of developed countries. Additionally, contrary to the majority of previous research, neither necessity nor opportunity-driven entrepreneurship affect the growth of GDP and employment, regardless of the country group under focus. This study brings interesting findings on the macro-outcomes of entrepreneurship before and after the recession, carrying important messages for further research and entrepreneurial policy making.