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A more entrepreneurial society is conducive to well-being

Datum:18 december 2018
entrepreneurs happy
entrepreneurs happy

Creating a more entrepreneurial society is currently an important topic in the political dialogue. It is, for example, an explicit goal on the policy agenda of the European Union. A main motivation behind the attempts to create a more entrepreneurial society is the recognition that entrepreneurship can be an important driver of economic growth. Entrepreneurship can also be of key importance for strengthening a country’s or region’s innovative capacity and plays a crucial role in helping society to adapt to change.

While there seems to be general agreement that the promotion of entrepreneurship has a positive effect on the general economic welfare of a society as a whole, much less is known about its potential impact on the well-being of individuals. One of the most important concerns in this respect is whether more entrepreneurship-friendly institutions would disproportionately favor the entrepreneurially active part of the population, at the expense of those who prefer paid employment.

Self-employed people have often been found to experience higher levels of well-being in terms of work and life satisfaction due to higher degrees of self-determination and self-enhancement. To put it in the words of the famous Austrian economist from the early part of the 20th century, Joseph Schumpeter, this sense of well-being is achieved by trying to realize the “dream and the will to found a private kingdom” (Schumpeter 1942, 93). Despite attention to this issue more recently, there is little research on the effect of entrepreneurship-facilitating conditions on the well-being of all citizens, including paid employees.

In my recent research, I am investigating how “the rules of the game” for entrepreneurs in a society affect the well-being of both entrepreneurs and paid-employees, along with my co-authors Michael Fritsch (Friedrich Schiller University Jena, Germany) and Alina Sorgner (John Cabot University Rome, Italy).

Some countries, like the US, are often regarded as very entrepreneur-friendly while in other countries entrepreneurs face many obstacles. In our research, we assess how entrepreneurship-facilitating conditions differ in countries by using many indicators, like the Global Entrepreneurship Index (GEI). This index covers a wide range of topics such as the availability of finance, start-up skills and opportunity among the population, cultural support of entrepreneurship and many further aspects. A high GEI score reflects that the country has institutions that promote entrepreneurship while a low GEI score reflects the prevalence of an entrepreneurship-inhibiting institutional environment. Additionally, we also make use of World Bank data on the ease of doing business per country.

Entrepreneurs should find it much easier to conduct business in entrepreneurship-friendly countries. Thus, we expect that the well-being obtained from self-employment should be higher in countries with entrepreneurship-facilitating institutions, as compared to countries with an entrepreneurship-inhibiting institutional environment.

In line with our expectation, we find that the ratio of job and life satisfaction of the self-employed over paid employees shows pronounced variation across countries. This variation is clearly related to the entrepreneurship-facilitating character of the respective institutional framework. Country-specific conditions play an important role in determining the actual level of well-being. Although the effect is more pronounced for the self-employed, another important key result of our research is that the entrepreneurship-facilitating quality of entrepreneurial institutions increases the levels of well-being for both entrepreneurs and paid employees.

The results suggest that fostering an entrepreneurial society is a welfare enhancing strategy that benefits both self-employed and paid employed individuals. Enhanced welfare in an entrepreneurial society does not come at the expense of paid employees.

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