Entrepreneurial Quality and Economic Crisis in the Eurozone Countries Driven by Innovation

Entrepreneurial Quality and Economic Crisis in the Eurozone Countries Driven by Innovation

Jose Manuel Saiz-Alvarez (EGADE Business School, Tecnológico de Monterrey, Mexico) and Alicia Coduras Martínez (Global Entrepreneurship Research Association, UK)
DOI: 10.4018/978-1-5225-5837-8.ch019


Most of the nations forming the Eurozone are hoping to boost entrepreneurship as one of the leading elements for job creation, innovation, and wealth to overcome the economic crisis. However, the quality of the entrepreneurial activity changes when qualified initiatives tend to impact on the economic development, while non-vocational-driven entrepreneurship has a null or little impact on the economy. This research analyzes the average quality of the Eurozone entrepreneurial activity driven by innovation before and after an economic crisis. The primary results of this chapter are (1) the quality of the entrepreneurial activity increases when there is a public-private collaboration to foster entrepreneurship, and (2) long-term unemployment generates necessity entrepreneurship and diminishes entrepreneurial quality.
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Is there a relationship between the level of economic activity and the nature of the entrepreneurship action developed? More specifically, does the existence of a low level of economic activity in a particular economy or geographical zone induce a weakening of the quality of the entrepreneurial activity developed within it?

It seems that both answers to these questions will be affirmative, as a healthy, growing economic climate should lead to the appearance of more and more varied opportunities likely to be applied by a host of entrepreneurs ready to profit from the opportunity being offered. On the other hand, a growing economy is more likely to promote attitudes of self-employment entrepreneurship since it reduces the perceived risks and improves the general ambiance of opportunity.

However, an economy in recession with rising unemployment would reduce the number and range of the opportunities offered to entrepreneurs and increases the perceived level of risk, while widespread unemployment could lead to an increase in the so-called necessity entrepreneurship (Sutter et al., 2017). As a result, the quality of entrepreneurial activity weakens in this economy (Slobodenyuk, 2017; Sánchez-Sellero et al., 2017).

This paper does not address these problems directly but starts a path that could very well lead to a general answer to the relationships they propose. Instead, the purpose of this paper centers into the link that exists between unemployment as a proxy for an economy in the downturn, and the increase in the necessity-driven kind of entrepreneurship, that we take as a crucial component in the lowering of the quality of the general entrepreneurial activity of that economy.

The quality of the entrepreneurial activity is one of the factors that influence the level of development and competitiveness of the nations (Acs et al., 2004, 2006, 2008). In short, we pretend to analyze the impact of the crisis, as expressed by the variation of the unemployment rate during the relevant years on the average quality of the entrepreneurial activity of a selected sample of Eurozone countries driven by innovation. Exactly, those that regularly participate in the Global Entrepreneurship Monitor (GEM), the most massive observatory on entrepreneurship worldwide.

The concrete research question is, do the Eurozone countries driven by innovation show worse average indicators of entrepreneurship quality after the economic crisis compared with signs before the crisis?

The research is relevant since several Eurozone countries affected by the crisis are considering entrepreneurship as a critical element for economic recovering to create employment and wealth. If the average quality of the entrepreneurial activity changes due to the crisis, then it could not contribute to the economy improving as expected, so measures to foster qualified entrepreneurship must be urgently designed and implemented. Quality of the entrepreneurial activity that also influences on late-career individuals, who are starting a business is positively associated with a change in the quality of life and negatively associated with variation in income (Kautonen, Kibler, & Minniti, 2017).

In this work, we present a brief literature review on entrepreneurial quality indicators and its theoretical model. We describe the impact of the crisis on the long-term unemployment rates of the selected sample of countries -as the variable that –presumably- has a higher influence in promoting less qualified entrepreneurial activity- and a discussion on its impact on the theoretical model of entrepreneurial quality. After that, we pose some research questions, we develop a methodological section, and we show the results for the change in the average quality of the entrepreneurial activity between the year 2007 (before the crisis) and the year 2016 (after the crisis). Finally, we show results’ discussion, comments, recommendations, limitations, and future research lines.

Key Terms in this Chapter

Innovation-Driven Entrepreneurship: Type of entrepreneurship guided by innovation to keep the company in positions of sustainable leadership over time.

Unemployment Rate: Percentage of the total workforce who are unemployed and looking actively for a paid job.

Vocational-Driven Entrepreneurship: Type of entrepreneurs defined by guiding his or her entrepreneurial efforts guided for vocation and not by a mere desire of earning money.

Necessity Entrepreneurship: Sort of entrepreneurship driven by the need for survival that occurs mainly in developing countries.

Opportunity Entrepreneurship: Type of entrepreneurship defined by the search and implementation of business opportunities to benefit the company's stakeholders.

Necessity-to-Opportunity Entrepreneurship: Situation that occurs when an economy goes from a stage of underdevelopment characterized by subsistence undertakings to another level of development defined by an increase in opportunities to undertake.

Entrepreneurial Quality: Entrepreneurial effort aimed at giving the highest quality to society in order to improve their quality of life, as well as that of entrepreneurs and their families.

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