Firm Entrepreneurship Case Study

Firm Entrepreneurship and Measures of Firm Entrepreneurship Activity
The main hypothesis of the economic theory of entrepreneurship is that in the economy firm entrepreneurship contributes to production through the combination of the existing productive factors. Innovation and firm entrepreneurship are found to have positive economic effects mainly in terms of employment opportunities, taxation revenues and economic output. The measurements of these positive effects provide the basis of international comparisons. The contemporary theories on firm entrepreneurship built on the contributions of Schumpeter who focused on the significance of the innovative entrepreneur being the main force moving the economy forward based on exiting capabilities
Other factors driving entrepreneurship are government spending on education, infrastructure and health. Entrepreneurship may have cyclical component associated with the business cycles and the long waves influencing economic activity and innovation (Schumpeter, 1939). Proper institutional setting is required for the development of entrepreneurship and for Murphy et al. (1999) protection of intellectual property rights is critical as well as the provision of various incentive structures. State regulation of market entry reduces the propensity to start up new firms and has negative effect on entrepreneurship (Ciccone, 2006). For Micco & Pages (2006) rigid regulations of labor markets impact negatively market entry and discourage firm entrepreneurship. Besides, according to Djankov (2008) administrative burden associated with taxes also affects firm entrepreneurship negatively. He has established that a 10 % increase in corporate tax reduces aggregate investment in relation to GDP by 2
Profits, industry growth and industry size are variables which are positively related to start-ups according to the Swedish Entrepreneurship Forum (2010). Entry and exit of firms can be an important indicator of innovative activity at industry level but for Baumol et al (1982) these processes can be associated with internal factors (organizational and management) or external factors (as threat to entry). For this reason net entry can be used as a better proxy for expansion of innovative industries. In technologically advanced industries the entry of foreign firms urges incumbents to make further innovative efforts while in innovation lagging industries entry reduces the expected returns from