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Entrepreneurship and Policy: The National System of Entrepreneurship in the European Union and in Its Member Countries

  • Laszlo A. Szerb , Zoltan Acs EMAIL logo and Erkko Autio


In this paper, we provide a brief review of how entrepreneurship policies have evolved and what implied conceptions of “entrepreneurship” underlie attempts to measure the phenomenon. We propose that a major shortcoming in policy thinking is the insufficient recognition that entrepreneurship, at a country level, is a systemic phenomenon and should be approached as such. To address this gap, we propose the concept of National Systems of Entrepreneurship that recognizes the systemic character of country-level entrepreneurship, and also recognizes that, although embedded in a country-level context, entrepreneurial processes are fundamentally driven by individuals. We then explain how the Global Entrepreneurship and Development Index methodology is designed to profile National Systems of Entrepreneurship. We apply the GEDI approach to examine the entrepreneurial performance of the European Union. According to the GEDI index, the EU countries reveal considerable differences in their entrepreneurial performance. Moreover, there are even larger differences over the 14 pillars of entrepreneurship. In addition to highlighting bottleneck factors, the index also provides rough indications on how much a country should seek to alleviate a given bottleneck. While there are numerous ways to improve entrepreneurship in the EU and its member states, we analyze only one simple situation. An important implication of the analysis is that uniform policy does not work, and the EU member states should apply different policy mixes to reach the same improvement in the GEDI points.


This study was undertaken with financial assistance from the European Union’s Social Renewal Operational Programme TÁMOP-4.2.1.B-10/2/KONV-2010-0002. The authors specially thank William N. Trumbull for valuable comments and edit.


Table 1A:

The description of the individual variables used in the GEDI.

Individual variableDescription
Opportunity RecognitionThe percentage of the 18–64 aged population recognizing good conditions to start business next 6 months in the area he/she lives,
Skill PerceptionThe percentage of the 18–64 aged population claiming to possess the required knowledge/skills to start business
Risk AcceptanceThe percentage of the 18–64 aged population stating that the fear of failure would not prevent starting a business
Know EntrepreneursThe percentage of the 18–64 aged population knowing someone who started a business in the past 2 years
CarrierThe percentage of the 18–64 aged population saying that people consider starting business as good carrier choice
StatusThe percentage of the 18–64 aged population thinking that people attach high status to successful entrepreneurs
Career StatusThe status and respect of entrepreneurs calculated as the average of Carrier and Status
Opportunity MotivationPercentage of the TEA businesses initiated because of opportunity start-up motive
Technology LevelPercentage of the TEA businesses that are active in technology sectors (high or medium)
Educational LevelPercentage of the TEA businesses owner/managers having participated over secondary education
CompetitorsPercentage of the TEA businesses started in those markets where not many businesses offer the same product
New ProductPercentage of the TEA businesses offering products that are new to at least some of the customers
New TechPercentage of the TEA businesses using new technology that is less than 5 years old average (including 1 year)
GazellePercentage of the TEA businesses having high job expectation average (over 10 more employees and 50% in 5 years)
ExportPercentage of the TEA businesses where at least some customers are outside country (over 1%)
Informal Investment MeanThe mean amount of 3 year informal investment
Business AngelThe percentage of the 18–64 aged population who provided funds for new business in past 3 years, excluding stocks and funds, average
Informal InvestmentThe amount of informal investment calculated as INFINVMEAN * BUSANG
Table 1B:

The description and source of the institutional variables used in the GEDI.

Institutional variableDescriptionSource of dataData availability
Domestic MarketDomestic market size that is the sum of gross domestic product plus value of imports of goods and services, minus value of exports of goods and services, normalized on a 1–7 (best) scale data are from the World Economic Forum Competitiveness.World Economic ForumThe Global Competitiveness Report 2011–2012, p. 498
UrbanizationUrbanization that is the percentage of the population living in urban areas, data are from the Population Division of the United Nations, 2010 estimateUnited Nations
Market AgglomerationThe size of the market: A combined measure of the domestic market size and the urbanization that later measures the potential agglomeration effect. Calculated as Domestic market*UrbanizationOwn calculation
Tertiary EducationGross enrolment ratio in tertiary education, 2009 or latest available data.UNESCO
Business RiskThe business climate rate “assesses the overall business environment quality in a country… It reflects whether corporate financial information is available and reliable, whether the legal system provides fair and efficient creditor protection, and whether a country’s institutional framework is favorable to intercompany transactions” ( It is a part of the Country Risk Rate. The alphabetical rating is turned to a seven point Likert scale from 1 (“D” rating) to 7 (A1 rating). 30 December 2010 data.Coface
Internet UsageThe number of Internet users in a particular country per 100 inhabitants, 2010 dataInternational Telecommunication Union IndividualsUsingInternet_00–10.xls
CorruptionThe Corruption Perceptions Index (CPI) measures the perceived level of public-sector corruption in a country. “The CPI is a “survey of surveys”, based on 13 different expert and business surveys.” ( Overall performance is measured on a ten point Likert scale. Data are from 2010.Transparency International
Economic Freedom“Business freedom is a quantitative measure of the ability to start, operate, and close a business that represents the overall burden of regulation, as well as the efficiency of government in the regulatory process. The business freedom score for each country is a number between 0 and 100, with 100 equaling the freest business environment. The score is based on 10 factors, all weighted equally, using data from the World Bank’s Doing Business study.” ( Data are from 2010.Heritage Foundation/World Bank
Tech AbsorptionFirm-level technology absorption capability: “Companies in your country are (1 = not able to absorb new technology, 7 = aggressive in absorbing new technology).”World Economic ForumThe Global Competitiveness Report 2011–2012. p. 491
Staff TrainingThe extent of staff training: “To what extent do companies in your country invest in training and employee development? (1 = hardly at all; 7 = to a great extent).”World Economic ForumThe Global Competitiveness Report 2011–2012, p. 449
Market DominanceExtent of market dominance: “Corporate activity in your country is (1 = dominated by a few business groups, 7 = spread among many firms).”World Economic ForumThe Global Competitiveness Report 2011–2012, p. 453
Technology TransferThese are the innovation index points from GCI: a complex measure of innovation including investment in research and development (R&D) by the private sector, the presence of high-quality scientific research institutions, the collaboration in research between universities and industry, and the protection of intellectual property.World Economic ForumThe Global Competitiveness Report 2011–2012, p. 22
GERDGross domestic expenditure on Research & Development (GERD) as a percentage of GDP, year 2009 or latest available data Puerto Rico, Dominican Republic, and United Arab Emirates are estimatedUNESCO
Business StrategyRefers to the ability of companies to pursue distinctive strategies, which involves differentiated positioning and innovative means of production and service delivery.World Economic ForumThe Global Competitiveness Report 2011–2012, p. 22
GlobalizationA part of the Globalization Index measuring the economic dimension of globalization. The variable involves the actual flows of trade, Foreign Direct Investment, portfolio investment, and income payments to foreign nationals as well as restrictions of hidden import barriers, mean tariff rate, taxes on international trade and capital account restrictions. Data are from the 2010 report and based on the 2007 survey. globalization_2011b_long.xlsKOF Swiss Economic InstituteDreher (2006)
Venture CapitalA measure of the venture capital availability on a 7-point Likert scale generating from a statement: Entrepreneurs with innovative, but risky projects can generally find venture capital in your country (1 = not true, 7 = true).”World Economic ForumThe Global Competitiveness Report 2011–2012, p. 484


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    “Optimal” in the sense of maximizing the GEDI index value.

Published Online: 2013-02-23

©2013 by Walter de Gruyter Berlin / Boston

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