Academic journal article Entrepreneurship: Theory and Practice

The Role of Dissatisfaction and per Capita Income in Explaining Self-Employment across 15 European Countries

Academic journal article Entrepreneurship: Theory and Practice

The Role of Dissatisfaction and per Capita Income in Explaining Self-Employment across 15 European Countries

Article excerpt

This article deals with explaining the sizable differences in the rate of self-employment (business ownership) across 15 European countries in the period 1978-2000, within a framework of occupational choice, focusing on the influence of dissatisfaction and of per capita income. Using two different measures of dissatisfaction, in addition to the level of economic development and controlling for several other variables, we find that, in addition to a negative and significant impact of per capita income, dissatisfaction at the level of societies has a positive and significant influence on self-employment levels. Both dissatisfaction with life and dissatisfaction with the way democracy works are found to influence self-employment. It is concluded that these are proxies for job dissatisfaction and at the same time represent other negative "displacements" known to promote self-employment. The findings indirectly point at the potential importance of push factors within the incentive structures of modern economies.

Introduction

Scholars such as Chandler (1977), Galbraith (1967), and Schumpeter (1942) have convinced a generation of economists, social scientists, and policy makers that the future was in the hands of large corporations, and that small business would fade away as the victim of its own inefficiencies. The justification for small businesses to survive seemed to be less on the grounds of economic efficiency than for employment and social and political purposes. More recently, however, the role ascribed to small business has changed. It is now also seen as a vehicle for entrepreneurship, contributing in terms of innovative and competitive power, rather than just employment and social and political stability (Morris, 2001). New evidence (Audretsch et al., 2001; Audretsch et al., 2002a; Audretsch & Thurik, 2000; Carree & Thurik, 1999, 2003) suggests that entrepreneurship is one of the determinants of economic growth. Therefore, it should be perceived as something desirable for economic reasons, rather than as a social good that should be maintained at an economic cost.

Confronted with rising concerns about economic growth and competitiveness in global markets, governments have responded to this new evidence by making the stimulation of self-employment a policy priority (Audretsch et al., 2001; Carree & Thurik, 2003; Geroski & Jacquemin, 1985; OECD, 1998). The question of how to realize this new policy agenda has led to the renewed recognition of two types of research questions. Firstly, why do some individuals seek self-employment, while others prefer to be an employee? Secondly, why are more individuals self-employed in some countries than in others? The first question is systematically addressed in the literature on occupational choice (Blanchflower & Oswald, 1998; Brockhaus, 1982; De Wit, 1993; Kihlstrom & Laffont, 1979; Shapero & Sokol, 1982; Van Praag, 1999), whereas the second has been studied in a more ad hoc manner (Acs et al., 1994; Audretsch et al., 2002b; Blanchflower, 2000; Blanchflower & Meyer, 1994; Blau, 1987; Evans & Leighton, 1989, 1990; Meager, 1992; Storey, 1991). Yet this latter question seems highly relevant, as the proportions of self-employment differ strongly between countries, making it plausible that conditions or the way in which individuals respond to them also vary significantly.

Policies for stimulating entrepreneurship will have to take these factors into account. Additionally, policy makers should be aware of the limits of policy influence. It is important to know the extent to which factors are at play that are hardly susceptible to policy measures, such as cultural characteristics that have been shown to be very stable and changing only slowly over time (Hofstede, 2001).

Previous empirical investigations into the proportion of self-employment across countries have primarily focused on the role of economic factors. …

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