6/21/2016 SE_Ostersund_02Oct131 2 October 2013 ENTREPRENORSKAPSDAGAR Ostersund, SE Why is it so hard to increase indigenous entrepreneurship? – in Sweden and Elsewhere Paul D. Reynolds Marie Curie Research Fellow Aston University

Stylized facts, empirical generalizations, recurring data patterns National Level of business creation National value structures 6/21/2016 SE_Ostersund_02Oct132 Explore Linkages

Business Creation Measure 6/21/2016 SE_Ostersund_02Oct133 Use adult population surveys Identify those active in business creation Potential owners, active in pre-profit stage Current owners, managers profits up to 3.5 years Add together to determine Total Entrepreneurial Activity [TEA] prevalence rate Number per 100 adults years old Very reliable measure, business creation a core feature of all conceptual definitions of “entrepreneurship” Great diversity across countries at any time Great stability within countries across time

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Year to Year TEA Value Correlations LagNumber of correlationsAverage Correlation One year90.91 Two years80.88 Three years70.84 Four years60.87 Five years50.80 Six years40.86 Seven years30.88 Eight years20.83 Nine years /21/2016 SE_Ostersund_02Oct135

Nine Year Lag Correlation: (n=37, R = 0.79) 6/21/2016 SE_Ostersund_02Oct136

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6/21/2016 SE_Ostersund_02Oct1310 [1]

National Values 6/21/2016 SE_Ostersund_02Oct1311 Use adult population surveys 68 Countries Develop Multi-Item Indices Traditional versus Secular Rational Traditional—on your own solve problems; do not expect help from public sector Secular rational—all responsible for all Survival versus Self-expression Survival—Focus on being economically useful, staying alive Self-expressive—Focus on personal development; reach full, unique potential

6/21/2016 SE_Ostersund_02Oct1312 TraditionalTopicSecular-rational Important in lifeGod*Not important in life Obedience and religious faithChildren should learn*Independence and determination Never justifiedAbortion*Can be justified Strong personal senseNational pride*Not so important Favors moreRespect for authority*Favors less Very importantReligionNot so important Believes existHeavenDoes not believe exists Very important in lifeWorkNot so important in life Source of problemsWife earns more than husbandNot a source of problems Very important in lifeFamilyNot so important in life FavorableLarge number of childrenNot favorable Parent’s dutyParents should sacrifice for their childrenNot so important Relatively favorableArmy rule of the countryNot favorable Seldom or neverDiscuss politicsOften Occupies the rightLeft-right political scaleOccupies the left Based on Tables 2.1 and 2.3 from Inglehart and Welzel (2005); * items emphasized in author’s discussion. Traditional vs. Secular Rational Values Items

Survival vs. Self-Expressive Value Items 6/21/2016 SE_Ostersund_02Oct1313 [1] SurvivalTopicSelf-Expression Economic, physical securityPersonal priority*Self-expression, quality of life Not veryPersonal happiness*Very Never justifiedHomosexuality*Can be justified Has not and would notSign a petition*Has or would Must be very carefulTrusting people*Less need to be careful Men better than womenPolitical leadersWomen acceptable DissatisfiedHousehold financial situationSatisfied Security, good incomeDefinition of a good jobAccomplishment, good colleagues Does not favor Less emphasis on money and material possessions Does favor Most importantTeach children to work hardNot so important Not very important in lifeLeisureVery important in life Based on Tables 2.1 and 2.4 from Inglehart and Welzel (2005);* items emphasized in authors’ discussion.

6/21/2016 SE_Ostersund_02Oct1314 [1] [1] Inglehart, Ronald and Christian Welzel (2010).

National Values: Comments 6/21/2016 SE_Ostersund_02Oct1315 Values Reflected in all major institutions Education Political Legal Economic High secular-rational and high self-expression Post-industrial society, sociologists ideal Space is occupied by Nordic Countries Highly traditional, high self-expression Empty quadrant (no countries with this combination)

6/21/2016 SE_Ostersund_02Oct1316 Prevalence of Nascent Entrepreneurs Prevalence of New Firm Owners Prevalence of Both (TEA Index) Traditional (-1) vs. Secular-rational (1) -.58*-.48*-.63* Security (-1) versus Self- Expression (1) Total of 76 countries, equal weights. Statistically significant relationship indicated by “*”.

Predicting national prevalence Nascent Entrepreneurs, in start-up process Explain 72% start-up variation (n=72) Major factors: readiness for entrepreneurship, informal investors, income inequality, % adults w/ high school degrees New firm owners, firms up to 3.5 years old: Explain 93% of new firm variation (n=72) Major factors: Presence of small firms, women working, traditional values, low GDP/capita, adults w/ high school degrees, increase in GDP/capita, high costs for commercial litigation, mid-adult population, low property rights recognition, presence informal investors LOW IMPACT: Economic characteristics (GDP/Capita), centralized control of economic activity (ease of business registration) 6/21/2016 SE_Ostersund_02Oct1317

Predicting Personal Participation (not national prevalence rates) 6/21/2016 SE_Ostersund_02Oct1318 Multi-level modeling procedures 72 countries; 583,127 individuals Predict active in start-ups (nascent entrepreneurs) Men, young, more education, working—some impact Low or high national income, more informal investors—some impact READINESS FOR ENTREPRENEURSHIP Perceive opportunity Confidence in own start-up skills Know entrepreneurs

Predicting readiness for entrepreneurship Perceive OpportunitiesStart-up Skills Personal Attributes Men Younger adultsMid-career adults Higher relative HH incomeMore than HS Education Working National Context Lower GDP/Capita Increase in personal income Population increase Strong traditional values Self-expressive emphasis 6/21/2016 SE_Ostersund_02Oct1319

Causal Linkage 6/21/2016 SE_Ostersund_02Oct1320 Traditional Values Self-Expressive Values Readiness for Entrepreneurship Opportunity Skills Business Creation

Conclusions 6/21/2016 SE_Ostersund_02Oct1321 VERY HARD to change national values Integral feature of the “social contract” Reflected in all national economic, educational, political, legal, religious structures May change over human generations Changes in “institutional details” have little or no impact Ex: World Bank “Doing Business” Measures NOTE: No ideal countries on value map –Emphasis on both tradition and self-expression –Anglo countries come closest

Policy Implications 6/21/2016 SE_Ostersund_02Oct1322 Keep at it.. Encouraging business creation –Focus on young adults AND their parents Use the education system to improve confidence in start- up skills –at all levels (High School, Vocational, University) Adapt all support institutions to facilitate business creation –E.g. Provide day care for children of women in business creation Don’t expect small adjustments to have an immediate impact –Small from the perspective of those involved in business creation Plan for a long term adjustments in work, career expectations and support institutions