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Frédéric DelmarEMLYON Business School & Research Institute of Industrial Economics

Karl WennbergImperial College London & Stockholm School of Economics of Economics

Social Conditions for Growth

– from Employment Programs towards Ambitious Entrepreneurship

Today’s Agenda

I. Entrepreneurship as self-employment (“the petty bourgeoisie”)

II. Growth oriented EntrepreneurshipIII. What is the situation in Sweden? Some empirical EvidencesIV. Policy implications and practical applications?

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I. Entrepreneurship as Self-Employment (1)

• Sweden has higher rates of self-employment (eget företag) than many OECD countries, including USA… (Shane, 2008)

• But the level of ambitious (growth-oriented) entrepreneurship is comparatively very low …• Dan Johansson and Magnus Henrekson surveyed the

literature or ‘gazelles’ – finding that more than 50% of all new jobs created are created by a small proportion of high-growth firms

Source: Johansson and Henrekson (2008)

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I. Entrepreneurship as Self-Employment (2)

• A majority of Swedish self-employed are ‘combiners’ – i.e. employees with a firm ‘on the side’ (Wennberg, Folta & Delmar, 2008)

• Few full-time entrepreneurs by international comparison (GEM report, 2007)

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Instead of encourage self-employment, encourage growth!

Source: Fritsch and Schroeter (2009)

Michael Fritsch and Alexandra Schroeter in Germany finds that there is an “optimal” level of start-up activity, i.e. too little or too much is not good!

Instead of encourage self-employment, we should encourage growth-oriented

entrepreneurship!

I. Entrepreneurship as Self-Employment (3)

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So what is “good” entrepreneurship?

I. Entrepreneurship as self-employment (“the petty bourgeoisie”)

II. Growth oriented EntrepreneurshipIII. What is the situation in Sweden?IV. What can be done?

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Growth oriented entrepreneurship in cities

Source: Sternberg, Bosma Acs (2008)

II. Growth-Oriented Entrepreneurship (1)

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Relative differences between city and overall country

Stockholm – an Entrepreneurial hotspot?

Source: Sternberg, Bosma Acs (2008)

Any entrepreneurship Growth oriented entrepreneurship

II. Growth-Oriented Entrepreneurship (2)

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Some empirical evidence from Sweden?

I. Entrepreneurship as self-employment (“the petty bourgeoisie”)

II. Growth oriented EntrepreneurshipIII. What is the situation in Sweden?IV. What can be done?

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III. Our Research Project(1): Framework

Source: Delmar & Wennberg (2009)

•Entrepreneurial firms learn from similar others•They grow to achieve sustainable profit that are

comparable to similar others (their aspiration level)•The importance of feedback loops

•Two types of learning:•Rational learning, “the more the better”•Behavioral learning, “it is good enough”

•Learning changes as firms evolve in age and size•Barriers to growth vs. barriers to survival

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III. Our Research Project(2): The Model

Probability of growth

Probability of survival

Probability

Age and/or size of new venture

Rational learning? Behavioral learning?

Cut–off ?

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III. Our Research Project (3): The data

Source: Delmar & Wennberg (2009)

•The effect of social comparison of profitability among 14,700 Swedish knowledge-intensive consultant Firms (IT-Consultants, Engineers, etc)•Data: FAD & LOUISE•Independent incorporations (Aktiebolag) started 1995-

2002

The variable of investigation is employment growth

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III. Our Research Project (4): The Measures

•We measure a bunch of cool things:•Earnings per employee (industry mean and for each firm)

•Threat rigidity ( =firms in crisis)

•Age, size, age*size•Survival bias

•We are interested in differences within firm’s evolution over time rather than differences between firms

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III. Our Research Project (4): The Results

• Firm behavior changes over age and as firms grow• “the aspiration level” drives growth• Firms acts rational when young and small

•If things goes well (above aspiration) invest more• Firms more satisfied above a certain age and size:

•If things goes well no need to invest•If things goes poor invest more

• Cut-off point: 5 to12 employees and 5 to 6 years old

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III. The next research project…

Source: Autio & Wennberg (2009)

•The next project investigate effect of social norms for start-up behavior among 682,154 persons in 68 countries

•Data: Global Entrepreneurship Monitor 2000-2007

•Results: Social norms have three times as much impact on probability of entrepreneurial entry compared to a person’s own attitudes

•Half of the variance in individual-level entrepreneurial behaviors resides in between social groups

Entrepreneurship is a social phenomenon – difficult to rapidly change with policy measures– but once entrepreneurial attitudes are in place (lGnosjö) they are likely to persist over time– take Stockholm or Munich as good examples and learn from these!

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Some empirical evidence from Sweden?

I. Entrepreneurship as self-employment (“the petty bourgeoisie”)

II. Growth oriented EntrepreneurshipIII. What is the situation in Sweden?IV. What can be done?

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IV. What can be done? (1)

•We know that entrepreneurship is consistently higher in some regions

•True both for people born there and people moving there, natives as well as immigrants, high educated as well as low educated

•How does the interaction between culture/norms AND economic policies affect entrepreneurship?

•The importance of suitable role model•Good policies comes from in-depth knowledge of

firm behavior

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IV. What can be done? (2)

•Search for profits leads to growth, not the other way around

•“Suitable profits” defined by social surrounding•Growth as a process with important steps that the

entrepreneurs need help to overcome:•Knowledge•Behavior•Structure

•Better communicate both the advantages and disadvantages of growth

- Management & entrepreneurship- Stability and development

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