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Wednesday, 18 May 2011

ZENTREPRENEURSHIP, TENDERPRENEURSHIP, NEPOTREPRENEURSHIP

A couple of days ago, a research paper landed in my inbox, authored by small business research celeb Roy Thurik and Phillip Koelinger of Erasmus Univ. in Rotterdam. It's due to appear at the Review of Economics and Statistics sometime next year. Although they are kind enough to acknowledge me as a reviewer my only contribution to this paper was to point out this other fascinating paper to them, which in the end they didn't have much use for : )

What the Thurik and Koellinger paper does is explore the relationship between a) entrepreneurship (measured in multiple ways, including business ownership but also self-reported entrepreneurial activity) and b) the business cycle and provide some explanations for the way in which they are correlated. Data refer to 22 OECD countries from 1972 to 2007. It's a very complex chicken-and-egg story but they find that entrepreneurship is a strong leading indicator of the business cycle at the global level, and a weaker on at the national level. The authors believe this is because at the global level the political cycle gets smoothed out, but that's another day's lecture.

For now I think it's important to point out one country in which the relationship between GDP growth and enterprise is nearly statistically zero. Can you guess which one it is?


You guessed right. The numbers here denote statistical significance, they are almost like the probability (ranging from 0 to 1) that the two variables are unrelated. Thus Greece's 0.99 score means the two variables are almost certainly uncorrelated. I.e. a rise in business ownership in Greece appears to be neither the cause nor the effect of cyclical GDP growth.

Now I must confess that this is the result of only one test, which looks at the relationship between enterprise and real GDP from year to year. Other tests that look at longer-term cycles also returned insignificant relationships for Greece. A test that controls for all but the strongest annual shocks to GDP finds the following:



Any ideas on why enterprise in Greece (and many other OECD countries) doesn't seem to respond to the business cycle, let alone lead it?  Probably because a lot of it is not actually enterprise. Not in the sense of taking on uninsurable risks and turning a profit. Remember, enterprise is not a Good Thing in Greece as it is nearly everywhere else in the world (see here and here).

What we have plenty of is Tenderpreneurs - people who will set up 'businesses' for the express purpose of winning government tenders; Zentrepreneurs - people who have no product as such or who have set up 'businesses' when in fact they are empoyees; and Nepotrepreneurs, people who are slowly burning their family's money while pretending to run a business.

More thoughts on this to follow. Possibly soon, possibly not.

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