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Measuring Latent Entrepreneurship Across Nations
David Blanchflower
Department of Economics
Dartmouth College and NBER
USA
blanchflower@dartmouth.edu
Andrew Oswald
Department of Economics
Warwick University
UK
andrew.oswald@warwick.ac.uk
January 2000
Abstract
This paper is an international study of latent entrepreneurship. It uses
new data on 25,000 randomly sampled people in 23 nations. These
individuals are interviewed and asked, among other things, whether they
would prefer to be self-employed or an employee. Huge numbers of
people say they wish to be self-employed. Strong differences are found
across countries. The paper constructs an international league table of
entrepreneurial spirit. Poland, Portugal and the US are at the top.
Russia, Denmark and Norway are at the bottom.
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Measuring Latent Entrepreneurship Across Nations
David Blanchflower and Andrew Oswald
It is sometimes argued that nations differ in their underlying entrepreneurial spirit.
The USA, in particular, is often singled out as a country with an inherently large
number of people who are keen to start firms. Europe, it is sometimes asserted,
lacks entrepreneurial individuals. While politicians argue that Eastern Europe is in
particular need of people who wish to run their own businesses, there is little
information about the potential supply of entrepreneurs in that region.
If there is anything to these ideas, which are the intrinsically entrepreneurial nations?
Are there, in the modern world, large numbers of frustrated small-business owners?
Few economists have attempted to measure entrepreneurial spirit across countries.
It seems a daunting task. We use new data to create an international league table of
what might be thought of as the simplest measure of entrepreneurial drive. There are
obvious difficulties in attempting to measure something so subtle, but the topic is
important.
Our focus is on self-employment. This is the simplest form of entrepreneurial activity.
Such people have made a job for themselves, and often for others. Medium-size
companies tend to have grown from a small business organized by a self-employed
man or woman. Self-employment also has the advantage that it can be defined
consistently across countries. Although there are people inside giant corporations
who may, on certain definitions, be viewed as entrepreneurial, it is not straightforward
to know how to identify them. Plus our concern here is in those who run their own
operations.
The paper measures entrepreneurial spirit by using the question
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“Suppose you were working and could choose between different kinds of jobs. Which
would you prefer:
being an employee
being self-employed?”
This question is asked in a newly released International Social Survey Program data
set. Information on more than 20 countries is available. Individuals in ISSP are
chosen randomly. They are interviewed face-to-face in a period spanning 1997 and
1998. The sample size is approximately 25,000 individuals across 23 nations.
Blanchflower and Oswald (1998) looked at related international self-employment
statistics for the late 1980s.
Table 1 contains the average responses by country. The patterns in these answers
are not what would have been predicted.
First, there is a strikingly large latent desire to be in charge of one’s own business.
There exists frustrated entrepreneurship on a huge scale. Even in countries at the
bottom of the table, a quarter of the population say they would prefer to be self-
employed. This compares to an actual proportion of self-employed people in most
countries of around 10-15% of the labour force. A plot of actual self-employed
proportions -- drawing upon data from Blanchflower (1999) -- against these
expressed desires for self-employment produces a loosely positive, though highly
dispersed, correlation.
This raises an important puzzle. It is interesting to wonder why so few individuals, in
the advanced nations, manage to translate their preferences into action. Lack of start-
up capital is one likely explanation. This factor is commonly cited by small-business
managers themselves (Blanchflower and Oswald, 1998). There is also econometric
evidence in its favor. Holding other influences constant, people who inherit cash, who
win the lottery, or who have large family assets, are all more likely both to set up and
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sustain a lasting small business. By contrast, childhood personality test-scores turn
out to have almost no predictive power, years later, in telling us who will be running
their own businesses.
Objections to our survey approach are possible. These subjects are asked a
hypothetical question, in a special setting, and their answers may be unrepresentative
of the truth in a practical or implemental sense. There is probably something to this
criticism. However, our aim is to capture the inherent level of entrepreneurial interest,
not merely the level that is currently converted into activity. Moreover, the same
question is asked everywhere, so relative responses – comparing the data nation by
nation -- should be meaningful. Finally, the numbers in Table 1 are so large, and
information in the area sufficiently sparse, that we think it unwise to disregard
answers of this type. In the late 1990s, in these countries, our evidence suggests that
there is considerable interest in the idea of being self-employed.
Second, there is marked variation by nation. The proportions of people who favor self-
employment vary from 80% to less than 30%. Poland, Portugal and the USA top the
league table. It appears that approximately three-quarters of these nations’ citizens
would like to manage their own business rather than work for a company as a regular
employee. Bottom of the league table of latent entrepreneurship come Russia,
Denmark and Norway. In these nations, roughly 30% of citizens are interested in
being self-employed.
The idea that Eastern Europe lacks potential entrepreneurs -- when compared to the
advanced nations -- appears to be wrong. Not only is Poland the country with the
single highest expressed level of interest in self-employment, but Eastern Europe is
represented evenly throughout the ranking.
It is interesting that Portugal, the US and Switzerland are so high in the table. They
are famously among the low-unemployment countries of the world. Disentangling
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cause and effect, however, is not possible in a simple analysis. Moreover,
Netherlands, for example, is near the bottom of Table 1 and yet has fairly small levels
of joblessness. Japan is unexpectedly low, in the international ranking of desire for
self-employment, at number 16. Britain ranks 14 out of the 23 nations.
For those who believe that the industrialized nations need more entrepreneurs, the
message of our work may be viewed as encouraging. People have strong underlying
interest in self-employment.
To conclude, we measure entrepreneurial spirit across nations. We use the answers
to a question asked of randomly sampled people -- in twenty three countries -- about
their desire to be self-employed. Large differences are found across countries.
Poland tops the international ranking of latent entrepreneurial spirit. The United
States is high up the rankings. Norway is at the bottom. Many other parts of Europe
come low down.
In the advanced nations, strikingly, there is enormous interest in entrepreneurial
activity. Currently it lies hidden.
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Table 1
Latent Entrepreneurship: An International League Table
Suppose you were working and could choose between different kinds of jobs. Which
would you prefer:
being an employee
being self-employed?
% who would prefer
to be self-employed N
Poland 79.9 922
Portugal 73.3 1616
USA 70.8 1071
Switzerland 64.5 2216
New Zealand 64.2 1046
W Germany 64.0 957
Italy 63.3 973
Slovenia 57.8 820
Canada 57.5 857
East Germany 56.6 389
Bulgaria 55.4 900
Hungary 49.8 1419
Israel 49.7 972
Great Britain 45.1 953
France 41.8 918
Japan 40.9 1065
Spain 38.9 1138
Sweden 38.8 1129
Czech Rep 36.8 961
Netherlands 36.0 2013
Russia 33.2 1409
Denmark 29.7 992
Norway 26.9 2021
N is the number of people interviewed in each nation. A sample of the whole adult
population is interviewed.
The Israel sample is for Israeli Jews only. Data for Cyprus, Bangladesh and
Philippines are omitted.
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Source: 1997/8 ISSP Module on Work Orientations/ US General Social Survey
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References
Blanchflower, D.G. (1999). “Self-Employment in OECD Countries”, Labor Economics,
North Holland Publishing, forthcoming.
Blanchflower, D.G. and Oswald, A.J. (1998). “What Makes an Entrepreneur?”, Journal
of Labor Economics, University of Chicago Press, 16, 26-60.
