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International Journal of Economics & Management Sciences

ISSN: 2162-6359

Open Access

The Effect of Entrepreneurial Activity on 2011-2015 National Economic Growth: An Econometric Analysis of Global Entrepreneurship Monitor Data

Abstract

William Nahm

Although it is generally agreed that entrepreneurship acts as a key determinant for economic growth, there has been a historical lack of empirical-based work on this topic. The creation of the Global Entrepreneurship Monitor (GEM), an organization that internationally collects data on entrepreneurship, provided researchers a standardized way to compare entrepreneurial activity across countries. Past literature that utilized this data offered promising insights on the effect of entrepreneurship on economic growth. However, most, if not all, of these papers were conducted only a few years after the advent of the GEM in 1999, limiting the amount of data that could be studied. Now that around two decades have passed, enough countries have participated in the GEM for multiple years to allow for an extensive time-series based analysis. With the latest GEM data, this paper investigates whether Total Entrepreneurial Activity (TEA) and its variants-opportunity, necessity, and high potential TEA-affect Gross Domestic Product (GDP) growth for a sample of 54 countries. Alternative growth-influencing variables are controlled for with the inclusion of the Growth Competitiveness Index (GCI). Out of the four types of TEA, only high potential TEA is found to have a statistically significant effect on economic growth. This finding is consistent with past literature that conducted empirical work on the GEM data and suggests that firms with high potential for growth impact the economy through job creation, increased innovation, and firm dynamics.

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