- Email: [email protected]
Entrepreneurship Indices Relevant Macroeconomic Data
Chapter 21
Entrepreneurship Indices Relevant Macroeconomic Data
Chapter Contents GEDI Data 318 Data from the Heritage Foundation 318
References
329
The ultimate goal of a model, such as the one proposed in the previous chapter or eventually the one that is truly a nonequilibrium model to describe the economy, would be to be able to relate GDP growth rate to key macroeconomic parameters and a macro-level parameter that accounts for the intensity level of innovation and entrepreneurship in the economy. As discussed in the previous chapter, this macro-level or system-level parameter, E, would be the result of nonlinear or nonequilibrium interactions among the “micro”-level or subsystem-level parameters, which have been described qualitatively in earlier sections and chapters and are the factors that contribute to innovation and entrepreneurship. While empirical data on GDP and key macroeconomic parameters such as those in the equations in the previous chapter have generally been available for most countries, including the three of interest in this book (Appendix 1), the challenge has been to obtain empirical data that can be used to measure the entrepreneurial intensity of a country. As mentioned in the last chapter, our search for this empirical data led us to the extensive work in this area by Audretsch and Acs and their colleagues (Acs and Armington, 2006; Acs and Audretsch, 2010; Acs et al., 2004, 2013; Audretsch, 1995, 2007; Audretsch and Thurik, 2001; Audretsch et al., 2006) and the work of Alfaro and Charlton (2006), Alfaro and Chari (2009), and Ghani et al. (2011a, 2011b). Empirical data for these three countries that we list below and have been also used elsewhere in earlier chapters are drawn primarily from the following sources: l
Global Entrepreneurship and Development Index (GEDI)—Zoltan Acs and Laszlo Szerb (http://cepp.gmu.edu/research/geindex/)
Innovation, Entrepreneurship, and the Economy in the US, China, and India © 2015 Elsevier Inc. All rights reserved.
317
318 PART
l
l
l
l
l
l
III Impact on the Economy
Global Entrepreneurship Monitor (GEM)—The GEM Project (http://www. gemconsortium.org/) Global Competiveness Index (GCI)—The World Economic Forum (http:// www.weforum.org/reports/global-competitiveness-report-2013-2014) Global Innovation Index (GII)—Cornell University, INSEAD, and WIPO (http://www.globalinnovationindex.org/content.aspx?page¼GII-Home) Index of Economic Freedom—The Heritage Foundation (www.heritage. org) Doing Business ranks—IFC, International Finance Organization (http:// www.doingbusiness.org/reports/global-reports/doing-business-2014) The Kauffmann Index—data for the United States—Ewing Marion Kaufmann Foundation (http://www.kauffman.org/what-we-do/research/kauffman-indexof-entrepreneurial-activity).
GEDI DATA We begin with Tables 21.1–21.3 constructed for these three countries drawing from GEDI data—GEM Data. All GEM data are survey data expressed in percentage terms (Fig. 21.1 and Tables 21.4–21.6). Table 21.7 provides the rankings of these three countries among the 142 countries in the GII report. Fig. 21.2 below provides graphs for the actual scores for the GII index and the subindices. Detailed data for each of the subindices are presented in Appendix 1. Additional details on the above data are available in Appendix 2.
DATA FROM THE HERITAGE FOUNDATION The Heritage Foundation measures economic freedom based on 10 quantitative and qualitative factors, grouped into 4 broad categories, or pillars, of economic freedom: 1. Rule of law (property rights and freedom from corruption) 2. Limited government (fiscal freedom and government spending) 3. Regulatory efficiency (business freedom, labor freedom, and monetary freedom) 4. Open markets (trade freedom, investment freedom, and financial freedom). Each of the 10 economic freedoms within these categories is graded on a scale of 0–100. A country’s overall score is derived by averaging these 10 economic freedoms, with equal weight being given to each. More information on the grading and methodology can be found in the appendix on their website—www. heritage.org (see Figs. 21.3 and 21.4). Our search for empirical data on innovation and entrepreneurship resulted in the sources of data listed above. We have provided some of the most relevant data
Institutional Variable
China
India
United States
Individual Variable
China
India
United States
Pillars
China
India
United States
Market agglomeration
0.51
0.30
1.00
Opportunity recognition
0.46
0.66
0.37
Opportunity perception
0.42
0.34
0.69
Tertiary education
0.26
0.15
0.97
Skill perception
0.41
0.61
0.61
Start-up skills
0.19
0.16
1.00
Business risk
0.33
0.50
1.00
Risk acceptance
0.68
0.53
0.67
No fear of failure
0.33
0.38
0.85
Internet usage
0.36
0.07
0.78
Know entrepreneurs
0.83
0.77
0.20
Networking
0.50
0.09
0.47
Corruption
0.23
0.21
0.70
Career status
0.65
0.67
0.60
Cultural support
0.27
0.25
0.70
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
TABLE 21.1 Variables Used for Constructing Entrepreneurial Attitude Index (GEDI) (2013)
21
319
320 PART
Institutional Variable
China
India
United States
Individual Variable
China
India
United States
Economic freedom
0.29
0.14
0.88
Tech absorption
0.53
0.64
Staff training
0.52
Market dominance
0.68
Pillars
China
India
United States
Opportunity motivation
0.35
0.59
0.64
Opportunity start-up
0.16
0.13
0.67
0.81
Technology level
0.11
0.05
0.54
Technology level
0.09
0.05
0.56
0.46
0.75
Educational level
0.31
0.46
0.81
Quality of human resources
0.28
0.40
0.87
0.66
0.80
Competitors
0.15
0.42
0.92
Competition
0.17
0.37
0.89
III Impact on the Economy
TABLE 21.2 Variables Used for Constructing Entrepreneurial Ability Index (GEDI) (2013)
Institutional Variable
China
India
United States
Individual Variable
China
India
United States
Pillars
China
India
United States
Technology transfer
0.49
0.40
0.91
New product
0.67
0.17
0.41
Product innovation
0.65
0.17
0.62
GERD
0.34
0.18
0.66
New tech
0.28
0.57
0.33
Process innovation
0.21
0.21
0.47
Business strategy
0.51
0.48
0.76
Gazelle
0.43
0.05
0.47
High growth
0.55
0.07
0.74
Globalization
0.37
0.26
0.65
Export
0.14
0.07
0.78
Internationalization
0.08
0.03
0.64
Venture capital
0.53
0.50
0.65
Informal investment
0.26
0.04
0.41
Risk capital
0.29
0.04
0.53
Constructed from data sourced from www.thegedi.org
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
TABLE 21.3 Variables Used for Constructing Entrepreneurial Aspiration Index (GEDI) (2013)
21
321
322 PART
III Impact on the Economy
GEMentrepreneurship activity indicators - 2013
30 25 20
New business ownership rate
15
Nascent entrepreneurship rate
10
Established business ownership rate
5 0 China
India
United States of America
FIGURE 21.1 Entrepreneurship activity comparisons constructed from the GEM data (2013).
on innovation and entrepreneurship indices and for some of the qualitative factors that lead to innovation and entrepreneurship that we have discussed in previous sections. As we begin our future work to bridge the model proposed in the previous chapter to appropriate parameters that represent innovation and entrepreneurship, we may use some of the indices discussed in this chapter or create new indices that might be more appropriate to the model we have proposed. In summary, in this section, we have provided a review of economic growth theory in Chapter 18. We traced the evolution of growth theory from the early years and through the work of Robert Solow. We reviewed how technology and innovation have been addressed in increasingly more complex models that have attempted to “endogenize” the impact of technological change and innovation, as they relate to the long-run “steady state” of the economy and associated economic growth. In Chapter 19, we provided an overview of a general macroeconomic framework that reviews approaches that have been taken to bring together the two major schools of thought—the Keynesian and the classical—into a common economic framework. This approach shows how the short-term and long-term dynamics of the economy relate to each other, with the latter being described by the models discussed previously in Chapter 18. All of these models are described by equilibrium economic models and most generally by dynamic stochastic general equilibrium models. In Chapter 20, we propose that processes such as innovation and entrepreneurship are nonlinear and nonequilibrium processes, in analogy with processes in the physical sciences. We refer to approaches and models that have been used to mathematically describe such processes in physical and now also in nonphysical systems. The qualitative factor that has been discussed in previous chapters
Country
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Established business ownership rate China
–
10.6
13.8
–
13.2
12.9
8.4
–
17.2
13.8
12.7
12.5
11
India
8.8
12.1
–
–
–
5.6
5.5
16.5
–
–
–
–
10.7
United States
5.8
5.7
5.4
5.4
4.7
5.4
5
8.3
5.9
7.7
9.1
8.6
7.5
Nascent entrepreneurship rate China
–
5.8
4.6
–
5.6
4.4
6.9
–
7.4
4.9
10.1
5.4
5.2
India
6.9
9
–
–
–
5.2
6
6.9
–
–
–
–
5.1
Untied States
8.1
7.1
8
7.4
8.8
7.4
6.5
5.9
4.9
4.9
8.3
8.9
9.2
New business ownership rate China
–
6.9
8.4
–
9.4
12
10
–
11.8
9.7
14.2
7.4
8.9
India
3.6
7.5
–
–
–
5.2
2.6
4.9
–
–
–
–
4.9
United States
3.6
4.6
4.9
4.8
5.2
3.3
3.4
5
3.2
2.8
4.3
4.1
3.7
Constructed from data sourced from http://www.gemconsortium.org/key-indicators
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
TABLE 21.4 Select Indicators for Entrepreneurship Activity Levels
21
323
Country
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
324 PART
TABLE 21.5 Select Indicators for Entrepreneurship Attitudes and Perceptions
Perceived capabilities –
36
38
–
23
36
39
–
35
42
44
38
36
India
40
42
–
–
–
62
73
58
–
–
–
–
56
United States
61
57
54
54
52
51
48
56
56
60
56
56
56
Perceived opportunities China
–
27
32
–
21
31
39
–
25
36
49
32
33
India
31
42
–
–
–
52
71
58
–
–
–
–
41
United States
35
37
31
34
32
24
25
37
28
35
36
43
47
China
27.5
29.5
–
45.5
24.7
31.5
–
22.6
26.9
42.8
20.4
14.4
India
30
–
–
–
31.3
49.7
32.9
–
–
–
–
22.8
United States
9.2
9
8
9
7.1
8.2
6.9
6.9
7.3
10.9
12.5
12.2
Entrepreneurial intention
Entrepreneurship as a desirable career choice China
73
–
74
69
69
–
66
70
73
72
70
India
–
–
–
67
67
67
–
–
–
–
61
United States
63
58
59
51
50
63
66
65
–
–
–
Constructed from data sourced from http://www.gemconsortium.org/key-indicators
III Impact on the Economy
China
Country
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
–
27
2013
Growth expectation of early-stage entrepreneurial activity: relative prevalence China India United States
27 9
7
27
36
21
29
20
25
33
36
26
15
12
7
37
32
31
36
41
52
73
54
29
23
39
49
40
3
8
15
8
5
15
15
17
8 27
29
32
30
60
–
30
New product early-stage entrepreneurial activity China
15
India
–
21
United States
–
45
30
38
37
39
61
38 37
32
45
47
45
International orientation early-stage entrepreneurial activity China
–
India
–
–
United States
–
–
3
11
3
15
21
Constructed from data sourced from http://www.gemconsortium.org/key-indicators
3
1
– 6
13
12
13
12
11
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
TABLE 21.6 Select Indicators for Entrepreneurship Aspirations
21
325
TABLE 21.7 Tables Constructed from GII Data: GII Ranks 2008–2009
2009–2010 United States
2011 United States
China
56
11
29
62
92
73
18
98
1
87
38
5
76
10
71
108
46
39
3
60
Business sophistication
49
50
1
Knowledge and technology outputs
28
23
6
China
India
Global Innovation Index
37
41
1
43
Institutions
56
44
17
Human capital and research
38
28
Infrastructure
48
Market sophistication
Creative outputs
China
India
India
2012 United States
China
India
7
34
64
94
15
121
56
104
13
12
33
63
32
3
26
46
41
2
17
70
79
78
2013 United States
United States
China
India
10
35
66
5
125
17
113
102
17
84
131
22
36
105
6
14
39
78
14
44
89
17
45
4
35
46
2
35
49
2
29
84
15
28
75
9
33
94
2
14
9
60
5
5
47
11
2
37
7
18
35
38
24
56
34
33
96
65
19
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
21
327
Scores of GII index and sub-indices―China 70 Global Innovation Index 60 Institutions Index scores
50 Human capital and research 40 Infrastructure 30 Market sophistication 20 Business sophistication 10 Knowledge and technology outputs
0 2011
2012
2013
Scores of GII index and sub-indices―India 60
Index scores
Global Innovation Index 50
Institutions
40
Human capital and research Infrastructure
30
Market sophistication 20 Business sophistication 10 Knowledge and technology outputs 0 2011
2012
2013
Creative outputs
FIGURE 21.2 GII scores: China, India, and the United States. (Continued)
is the “micro” level of the larger system, the economy. These subsystems interact among themselves cooperatively to create “mesoscopic” effects at the firm level and cumulatively across the economy to have a “macro”-level effect. In lieu of a truly nonequilibrium model, we treat the effects of innovation and entrepreneurship as jump diffusions that augment the traditional equilibrium models. The net cumulative effect of these jumps is economic growth. The intensity level or the activity level of this jump diffusion is determined by the net effect of all the qualitative parameters discussed in previous chapters. In this chapter, we have shared the results of our search for suitable empirical data to represent the intensity level of innovation and entrepreneurship in a given economy, in our case China, India, and the United States.
Scores of GII index and sub-indices―US 100 Global Innovation Index 90 Institutions
80
Index scores
70
Human capital and research
60 Infrastructure
50
Market sophistication
40 30
Business sophistication
20 Knowledge and technology outputs
10 0
Creative outputs 2011
2012
2013
FIGURE 21.2 (Continued)
100 90 80 70 60 50 40 30 20 10 0
China
India
United States
FIGURE 21.3 Index of Economic Freedom (2014). (Source: Constructed from data sourced from www.heritage.org.)
Index of economic freedom 90 80 70 60 50 40 30 20 10 0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 China
India
United States
FIGURE 21.4 Index of Economic Freedom: overall score from 1999 to 2014. (Source: Constructed from data sourced from www.heritage.org.)
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
21
329
The intent of future work would be to build on the model and approach we have proposed here and relate them to suitable empirical data in order to assess the impact of innovation and entrepreneurship on economic growth.
REFERENCES Acs, Z.J., Armington, C., 2006. Entrepreneurship, Geography, and American Economic Growth. Cambridge University Press. Acs, Z.J., Audretsch, D.B. (Eds.), 2010. Handbook of Entrepreneurship Research, second ed. Springer. Acs, Z.J., Audretsch, D.B., Braunerjelm, P., Carlsson, B., 2004. The knowledge filter in endogenous growth. Discussion Papers on Entrepreneurship, Growth and Public Policy, Max Planck Institute for Research into Economic Systems, pp. 1–38. Acs, Z.J., Szerb, L., Autio, E., 2013. The Global Entrepreneurship and Development Index. Edward Elgar Publishers. Alfaro, L., Chari, A., 2009. India transformed? Insight from the Firm level—1988–2005. NBER Working Paper 15448. http://www.nber.org/papers/w15448. Alfaro, L., Charlton, A., 2006. International financial integration and entrepreneurship. International Monetary Fund. https://www.imf.org/external/. . ./alfaro.pdf. Audretsch, D.B., 1995. Innovation and Industry Evolution. MIT Press. Audretsch, D.B., 2007. Entrepreneurship capital and economic growth. Oxford Rev. Econ. Policy 23 (1), 63–78. Audretsch, D.B., Thurik, R., 2001. Linking entrepreneurship to growth. OECD Science, Technology Industry Working Papers, pp. 1–34. Audretsch, D.B., Keilbach, M.C., Lehmann, E.F., 2006. Entrepreneurship and Economic Growth. Oxford University Press. Ghani, E., Kerr, W.R., O’Connell, S.D., 2011a. Promoting entrepreneurship, growth, and job creation. In: Ghani, E. (Ed.), Reshaping Tomorrow. Oxford University Press, Oxford, UK. Ghani, E., Kerr, W.R., O’Connell, S.D., 2011b. Spatial determinants of entrepreneurship in India. NBER Working Paper, 17514. http://www.nber.org/papers/w17514.
Entrepreneurship Indices Relevant Macroeconomic Data
Chapter Contents GEDI Data 318 Data from the Heritage Foundation 318
References
329
The ultimate goal of a model, such as the one proposed in the previous chapter or eventually the one that is truly a nonequilibrium model to describe the economy, would be to be able to relate GDP growth rate to key macroeconomic parameters and a macro-level parameter that accounts for the intensity level of innovation and entrepreneurship in the economy. As discussed in the previous chapter, this macro-level or system-level parameter, E, would be the result of nonlinear or nonequilibrium interactions among the “micro”-level or subsystem-level parameters, which have been described qualitatively in earlier sections and chapters and are the factors that contribute to innovation and entrepreneurship. While empirical data on GDP and key macroeconomic parameters such as those in the equations in the previous chapter have generally been available for most countries, including the three of interest in this book (Appendix 1), the challenge has been to obtain empirical data that can be used to measure the entrepreneurial intensity of a country. As mentioned in the last chapter, our search for this empirical data led us to the extensive work in this area by Audretsch and Acs and their colleagues (Acs and Armington, 2006; Acs and Audretsch, 2010; Acs et al., 2004, 2013; Audretsch, 1995, 2007; Audretsch and Thurik, 2001; Audretsch et al., 2006) and the work of Alfaro and Charlton (2006), Alfaro and Chari (2009), and Ghani et al. (2011a, 2011b). Empirical data for these three countries that we list below and have been also used elsewhere in earlier chapters are drawn primarily from the following sources: l
Global Entrepreneurship and Development Index (GEDI)—Zoltan Acs and Laszlo Szerb (http://cepp.gmu.edu/research/geindex/)
Innovation, Entrepreneurship, and the Economy in the US, China, and India © 2015 Elsevier Inc. All rights reserved.
317
318 PART
l
l
l
l
l
l
III Impact on the Economy
Global Entrepreneurship Monitor (GEM)—The GEM Project (http://www. gemconsortium.org/) Global Competiveness Index (GCI)—The World Economic Forum (http:// www.weforum.org/reports/global-competitiveness-report-2013-2014) Global Innovation Index (GII)—Cornell University, INSEAD, and WIPO (http://www.globalinnovationindex.org/content.aspx?page¼GII-Home) Index of Economic Freedom—The Heritage Foundation (www.heritage. org) Doing Business ranks—IFC, International Finance Organization (http:// www.doingbusiness.org/reports/global-reports/doing-business-2014) The Kauffmann Index—data for the United States—Ewing Marion Kaufmann Foundation (http://www.kauffman.org/what-we-do/research/kauffman-indexof-entrepreneurial-activity).
GEDI DATA We begin with Tables 21.1–21.3 constructed for these three countries drawing from GEDI data—GEM Data. All GEM data are survey data expressed in percentage terms (Fig. 21.1 and Tables 21.4–21.6). Table 21.7 provides the rankings of these three countries among the 142 countries in the GII report. Fig. 21.2 below provides graphs for the actual scores for the GII index and the subindices. Detailed data for each of the subindices are presented in Appendix 1. Additional details on the above data are available in Appendix 2.
DATA FROM THE HERITAGE FOUNDATION The Heritage Foundation measures economic freedom based on 10 quantitative and qualitative factors, grouped into 4 broad categories, or pillars, of economic freedom: 1. Rule of law (property rights and freedom from corruption) 2. Limited government (fiscal freedom and government spending) 3. Regulatory efficiency (business freedom, labor freedom, and monetary freedom) 4. Open markets (trade freedom, investment freedom, and financial freedom). Each of the 10 economic freedoms within these categories is graded on a scale of 0–100. A country’s overall score is derived by averaging these 10 economic freedoms, with equal weight being given to each. More information on the grading and methodology can be found in the appendix on their website—www. heritage.org (see Figs. 21.3 and 21.4). Our search for empirical data on innovation and entrepreneurship resulted in the sources of data listed above. We have provided some of the most relevant data
Institutional Variable
China
India
United States
Individual Variable
China
India
United States
Pillars
China
India
United States
Market agglomeration
0.51
0.30
1.00
Opportunity recognition
0.46
0.66
0.37
Opportunity perception
0.42
0.34
0.69
Tertiary education
0.26
0.15
0.97
Skill perception
0.41
0.61
0.61
Start-up skills
0.19
0.16
1.00
Business risk
0.33
0.50
1.00
Risk acceptance
0.68
0.53
0.67
No fear of failure
0.33
0.38
0.85
Internet usage
0.36
0.07
0.78
Know entrepreneurs
0.83
0.77
0.20
Networking
0.50
0.09
0.47
Corruption
0.23
0.21
0.70
Career status
0.65
0.67
0.60
Cultural support
0.27
0.25
0.70
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
TABLE 21.1 Variables Used for Constructing Entrepreneurial Attitude Index (GEDI) (2013)
21
319
320 PART
Institutional Variable
China
India
United States
Individual Variable
China
India
United States
Economic freedom
0.29
0.14
0.88
Tech absorption
0.53
0.64
Staff training
0.52
Market dominance
0.68
Pillars
China
India
United States
Opportunity motivation
0.35
0.59
0.64
Opportunity start-up
0.16
0.13
0.67
0.81
Technology level
0.11
0.05
0.54
Technology level
0.09
0.05
0.56
0.46
0.75
Educational level
0.31
0.46
0.81
Quality of human resources
0.28
0.40
0.87
0.66
0.80
Competitors
0.15
0.42
0.92
Competition
0.17
0.37
0.89
III Impact on the Economy
TABLE 21.2 Variables Used for Constructing Entrepreneurial Ability Index (GEDI) (2013)
Institutional Variable
China
India
United States
Individual Variable
China
India
United States
Pillars
China
India
United States
Technology transfer
0.49
0.40
0.91
New product
0.67
0.17
0.41
Product innovation
0.65
0.17
0.62
GERD
0.34
0.18
0.66
New tech
0.28
0.57
0.33
Process innovation
0.21
0.21
0.47
Business strategy
0.51
0.48
0.76
Gazelle
0.43
0.05
0.47
High growth
0.55
0.07
0.74
Globalization
0.37
0.26
0.65
Export
0.14
0.07
0.78
Internationalization
0.08
0.03
0.64
Venture capital
0.53
0.50
0.65
Informal investment
0.26
0.04
0.41
Risk capital
0.29
0.04
0.53
Constructed from data sourced from www.thegedi.org
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
TABLE 21.3 Variables Used for Constructing Entrepreneurial Aspiration Index (GEDI) (2013)
21
321
322 PART
III Impact on the Economy
GEMentrepreneurship activity indicators - 2013
30 25 20
New business ownership rate
15
Nascent entrepreneurship rate
10
Established business ownership rate
5 0 China
India
United States of America
FIGURE 21.1 Entrepreneurship activity comparisons constructed from the GEM data (2013).
on innovation and entrepreneurship indices and for some of the qualitative factors that lead to innovation and entrepreneurship that we have discussed in previous sections. As we begin our future work to bridge the model proposed in the previous chapter to appropriate parameters that represent innovation and entrepreneurship, we may use some of the indices discussed in this chapter or create new indices that might be more appropriate to the model we have proposed. In summary, in this section, we have provided a review of economic growth theory in Chapter 18. We traced the evolution of growth theory from the early years and through the work of Robert Solow. We reviewed how technology and innovation have been addressed in increasingly more complex models that have attempted to “endogenize” the impact of technological change and innovation, as they relate to the long-run “steady state” of the economy and associated economic growth. In Chapter 19, we provided an overview of a general macroeconomic framework that reviews approaches that have been taken to bring together the two major schools of thought—the Keynesian and the classical—into a common economic framework. This approach shows how the short-term and long-term dynamics of the economy relate to each other, with the latter being described by the models discussed previously in Chapter 18. All of these models are described by equilibrium economic models and most generally by dynamic stochastic general equilibrium models. In Chapter 20, we propose that processes such as innovation and entrepreneurship are nonlinear and nonequilibrium processes, in analogy with processes in the physical sciences. We refer to approaches and models that have been used to mathematically describe such processes in physical and now also in nonphysical systems. The qualitative factor that has been discussed in previous chapters
Country
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Established business ownership rate China
–
10.6
13.8
–
13.2
12.9
8.4
–
17.2
13.8
12.7
12.5
11
India
8.8
12.1
–
–
–
5.6
5.5
16.5
–
–
–
–
10.7
United States
5.8
5.7
5.4
5.4
4.7
5.4
5
8.3
5.9
7.7
9.1
8.6
7.5
Nascent entrepreneurship rate China
–
5.8
4.6
–
5.6
4.4
6.9
–
7.4
4.9
10.1
5.4
5.2
India
6.9
9
–
–
–
5.2
6
6.9
–
–
–
–
5.1
Untied States
8.1
7.1
8
7.4
8.8
7.4
6.5
5.9
4.9
4.9
8.3
8.9
9.2
New business ownership rate China
–
6.9
8.4
–
9.4
12
10
–
11.8
9.7
14.2
7.4
8.9
India
3.6
7.5
–
–
–
5.2
2.6
4.9
–
–
–
–
4.9
United States
3.6
4.6
4.9
4.8
5.2
3.3
3.4
5
3.2
2.8
4.3
4.1
3.7
Constructed from data sourced from http://www.gemconsortium.org/key-indicators
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
TABLE 21.4 Select Indicators for Entrepreneurship Activity Levels
21
323
Country
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
324 PART
TABLE 21.5 Select Indicators for Entrepreneurship Attitudes and Perceptions
Perceived capabilities –
36
38
–
23
36
39
–
35
42
44
38
36
India
40
42
–
–
–
62
73
58
–
–
–
–
56
United States
61
57
54
54
52
51
48
56
56
60
56
56
56
Perceived opportunities China
–
27
32
–
21
31
39
–
25
36
49
32
33
India
31
42
–
–
–
52
71
58
–
–
–
–
41
United States
35
37
31
34
32
24
25
37
28
35
36
43
47
China
27.5
29.5
–
45.5
24.7
31.5
–
22.6
26.9
42.8
20.4
14.4
India
30
–
–
–
31.3
49.7
32.9
–
–
–
–
22.8
United States
9.2
9
8
9
7.1
8.2
6.9
6.9
7.3
10.9
12.5
12.2
Entrepreneurial intention
Entrepreneurship as a desirable career choice China
73
–
74
69
69
–
66
70
73
72
70
India
–
–
–
67
67
67
–
–
–
–
61
United States
63
58
59
51
50
63
66
65
–
–
–
Constructed from data sourced from http://www.gemconsortium.org/key-indicators
III Impact on the Economy
China
Country
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
–
27
2013
Growth expectation of early-stage entrepreneurial activity: relative prevalence China India United States
27 9
7
27
36
21
29
20
25
33
36
26
15
12
7
37
32
31
36
41
52
73
54
29
23
39
49
40
3
8
15
8
5
15
15
17
8 27
29
32
30
60
–
30
New product early-stage entrepreneurial activity China
15
India
–
21
United States
–
45
30
38
37
39
61
38 37
32
45
47
45
International orientation early-stage entrepreneurial activity China
–
India
–
–
United States
–
–
3
11
3
15
21
Constructed from data sourced from http://www.gemconsortium.org/key-indicators
3
1
– 6
13
12
13
12
11
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
TABLE 21.6 Select Indicators for Entrepreneurship Aspirations
21
325
TABLE 21.7 Tables Constructed from GII Data: GII Ranks 2008–2009
2009–2010 United States
2011 United States
China
56
11
29
62
92
73
18
98
1
87
38
5
76
10
71
108
46
39
3
60
Business sophistication
49
50
1
Knowledge and technology outputs
28
23
6
China
India
Global Innovation Index
37
41
1
43
Institutions
56
44
17
Human capital and research
38
28
Infrastructure
48
Market sophistication
Creative outputs
China
India
India
2012 United States
China
India
7
34
64
94
15
121
56
104
13
12
33
63
32
3
26
46
41
2
17
70
79
78
2013 United States
United States
China
India
10
35
66
5
125
17
113
102
17
84
131
22
36
105
6
14
39
78
14
44
89
17
45
4
35
46
2
35
49
2
29
84
15
28
75
9
33
94
2
14
9
60
5
5
47
11
2
37
7
18
35
38
24
56
34
33
96
65
19
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
21
327
Scores of GII index and sub-indices―China 70 Global Innovation Index 60 Institutions Index scores
50 Human capital and research 40 Infrastructure 30 Market sophistication 20 Business sophistication 10 Knowledge and technology outputs
0 2011
2012
2013
Scores of GII index and sub-indices―India 60
Index scores
Global Innovation Index 50
Institutions
40
Human capital and research Infrastructure
30
Market sophistication 20 Business sophistication 10 Knowledge and technology outputs 0 2011
2012
2013
Creative outputs
FIGURE 21.2 GII scores: China, India, and the United States. (Continued)
is the “micro” level of the larger system, the economy. These subsystems interact among themselves cooperatively to create “mesoscopic” effects at the firm level and cumulatively across the economy to have a “macro”-level effect. In lieu of a truly nonequilibrium model, we treat the effects of innovation and entrepreneurship as jump diffusions that augment the traditional equilibrium models. The net cumulative effect of these jumps is economic growth. The intensity level or the activity level of this jump diffusion is determined by the net effect of all the qualitative parameters discussed in previous chapters. In this chapter, we have shared the results of our search for suitable empirical data to represent the intensity level of innovation and entrepreneurship in a given economy, in our case China, India, and the United States.
Scores of GII index and sub-indices―US 100 Global Innovation Index 90 Institutions
80
Index scores
70
Human capital and research
60 Infrastructure
50
Market sophistication
40 30
Business sophistication
20 Knowledge and technology outputs
10 0
Creative outputs 2011
2012
2013
FIGURE 21.2 (Continued)
100 90 80 70 60 50 40 30 20 10 0
China
India
United States
FIGURE 21.3 Index of Economic Freedom (2014). (Source: Constructed from data sourced from www.heritage.org.)
Index of economic freedom 90 80 70 60 50 40 30 20 10 0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 China
India
United States
FIGURE 21.4 Index of Economic Freedom: overall score from 1999 to 2014. (Source: Constructed from data sourced from www.heritage.org.)
Entrepreneurship Indices Relevant Macroeconomic Data Chapter
21
329
The intent of future work would be to build on the model and approach we have proposed here and relate them to suitable empirical data in order to assess the impact of innovation and entrepreneurship on economic growth.
REFERENCES Acs, Z.J., Armington, C., 2006. Entrepreneurship, Geography, and American Economic Growth. Cambridge University Press. Acs, Z.J., Audretsch, D.B. (Eds.), 2010. Handbook of Entrepreneurship Research, second ed. Springer. Acs, Z.J., Audretsch, D.B., Braunerjelm, P., Carlsson, B., 2004. The knowledge filter in endogenous growth. Discussion Papers on Entrepreneurship, Growth and Public Policy, Max Planck Institute for Research into Economic Systems, pp. 1–38. Acs, Z.J., Szerb, L., Autio, E., 2013. The Global Entrepreneurship and Development Index. Edward Elgar Publishers. Alfaro, L., Chari, A., 2009. India transformed? Insight from the Firm level—1988–2005. NBER Working Paper 15448. http://www.nber.org/papers/w15448. Alfaro, L., Charlton, A., 2006. International financial integration and entrepreneurship. International Monetary Fund. https://www.imf.org/external/. . ./alfaro.pdf. Audretsch, D.B., 1995. Innovation and Industry Evolution. MIT Press. Audretsch, D.B., 2007. Entrepreneurship capital and economic growth. Oxford Rev. Econ. Policy 23 (1), 63–78. Audretsch, D.B., Thurik, R., 2001. Linking entrepreneurship to growth. OECD Science, Technology Industry Working Papers, pp. 1–34. Audretsch, D.B., Keilbach, M.C., Lehmann, E.F., 2006. Entrepreneurship and Economic Growth. Oxford University Press. Ghani, E., Kerr, W.R., O’Connell, S.D., 2011a. Promoting entrepreneurship, growth, and job creation. In: Ghani, E. (Ed.), Reshaping Tomorrow. Oxford University Press, Oxford, UK. Ghani, E., Kerr, W.R., O’Connell, S.D., 2011b. Spatial determinants of entrepreneurship in India. NBER Working Paper, 17514. http://www.nber.org/papers/w17514.