Entrepreneurship and Human Development: An International Analysis.
| Autor | Ballesta, Jose Antonio Camacho |
1 Introduction
Social science academics have historically been motivated to study entrepreneurship (Urbano, Aparicio, & Audretsch, 2018). Research on the effects of entrepreneurship has focused primarily on determining its impact on economic growth, productivity, and employment (Acs & Szerb, 2007; Campos, Parellada, & Palma, 2012; Carree, Van Stel, Thurik, & Wennekers, 2007; Perenyi & Losoncz, 2018). Interest in understanding the effects of entrepreneurship on the economy grew at the beginning of the 1980s, when a study of job creation in the United States by Birch (1981) concluded that small and medium-sized enterprises were the main agents creating employment (Gnyawali & Fogel, 1994; Urbano & Alvarez, 2014).
Since the last decade of the 20th century, research about the social effects of entrepreneurship has focused on determining its impact on countries' development, from the perspectives of economic and regional development. The results of these studies have concluded that the social impact of entrepreneurship depends primarily on factors such as a country's stage of development, the economic sector in which the entrepreneurial activity is performed, and the motivations that lead people to become entrepreneurs (Acs, Audretsch, Braunerhjelm, & Carlsson, 2012; Acs & Storey, 2004; Audretsch, 2007; Audretsch, Bonte, & Keilbach, 2008; Urbano & Aparicio, 2016). The type of entrepreneurship that generates the greatest impact on economic growth and economic development is opportunity entrepreneurship oriented toward innovation (Acs et al., 2012; Acs & Storey, 2004; Baumol, 1990; Levie, Autio, Acs, & Hart, 2014; Schumpeter, 1939; Shane & Venkataraman, 2000; Wennekers, Van Wennekers, Thurik, & Reynolds, 2005).
However, theories of development have been extended to include alternative arguments to those that support economic growth as a driver of societal wellbeing (Kleine, 2010). Since the second half of the 20th century, discussions of development have been guided by different perspectives. These include theories positing the origin of dependency and inequalities as characteristics of the capitalist system (Frank, 1967), and alternative approaches to development that recognize ecological, economic, and social goals (Chambers, 1983). One of the most influential theories countering the view of development focused on economic growth is the capability approach (CA) (Kleine, 2010; Robeyns, 2005). In this approach, development is defined as "a process of expanding the freedoms that people enjoy" (Sen, 1999, p. 3) to lead the kind of life they have reason to value (Sen, 1999). In this theory, economic growth is important only as a means for people to achieve and live lives that they value (Dreze & Sen, 2002; Robeyns, 2005).
Growing interest in a human development paradigm grounded primarily in the CA (Robeyns, 2017) has led to the need to research the effects of entrepreneurship on the expansion of capabilities or human freedoms (Hartmann, 2014; Naude, Amoros, & Cristi, 2013). Since 1990, the CA has been used as a theoretical framework for the universal promulgation of the concept of HD (UNDP, 1990). This concept includes the expansion of people's capabilities so that political, economic, and social freedoms provide them with "opportunities for being creative and productive" (UNDP, 1990, p. 10). This definition highlights the need for people to develop their creativity, which motivates them to innovate in the production of goods and services, potentially approaching the concept of the entrepreneur suggested by Schumpeter (1939). The UN's vision of the impact of entrepreneurship on HD is observed in the reports it has issued. The review shows a close relationship between entrepreneurship and HD, with the 2015 report in particular highlighting the benefits of creative entrepreneurship and innovation, which may have a positive impact on society (UNDP, 2014).
However, few studies published in high-impact journals provide information on the relationship between entrepreneurship and HD. One important contribution is made by Gries and Naude (2011), who proposed a theoretical framework that could relate entrepreneurship to HD based on the CA approach. For these authors, entrepreneurship is a "functioning," because it is the result of the economic or work activity in which people are involved. They argued that entrepreneurship, as a resource, has the capacity to generate new job opportunities in addition to facilitating other functionings.
A literature review by Gries and Naude (2011) concluded that few studies have been published about the impact of entrepreneurship on development beyond its contribution to economic growth, highlighting the need for evidence to address this gap. In the review carried out for this study, Gries and Naude's (2011) conclusion is validated. Therefore, the main goal of this study is to present new evidence about the relationship between entrepreneurship and human development (HD). This analysis is carried out using the CA as the theoretical framework, which implies that to determine the effects of entrepreneurship on HD, the analysis should first identify whether entrepreneurs engage in an activity because it is what they really want to do, or because it is imposed on them by their socio-economic circumstances. Then, the analysis should focus on the normative aspect of entrepreneurship by identifying whether this type of activity positively or negatively affects HD. Therefore, it is necessary to evaluate the relationship between entrepreneurship rates and multidimensional measures of human development.
An econometric analysis is carried out using the pooled ordinary least squares (pooled OLS) and panel data techniques. The results provide new evidence on the effects of entrepreneurship on HD. The findings suggests that innovative entrepreneurship has a positive effect on HD, measured by the Social Progress Index (SPI), which is calculated based on 53 indicators classified into three dimensions of social progress: basic human needs, foundations of wellbeing, and opportunity. Furthermore, innovative entrepreneurship has positive effects on the Modified Human Development Index (MHDI), without gross domestic product per capita. However, the results indicate that necessity entrepreneurship does not help to increase human development, whether measured by the SPI or MHDI.
The rest of the paper proceeds as follows. The next section presents the conceptual framework and develops the hypotheses. Section 3 outlines the sources of information and method. Section 4 presents the findings. The final section concludes the paper with recommendations and policy implications.
2 Conceptual Framework and Hypotheses
2.1. Capability approach (CA) and entrepreneurship
Historically, GDP per capita has been used to measure development (Kuznets, 1955). However, researchers have recognized that pure economic indicators do not represent the full multidimensionality of development (Stiglitz, Sen, & Fitoussi, 2009). S. Anand and Sen (2000) argued that focusing on variables such as GDP per capita or national wealth to measure levels of development perpetuates the traditional approach oriented toward opulence, whereas the search for wellbeing should focus on improvements in positive freedoms or people's capabilities (Sen, 1999).
The CA is a better way to measure inequality based on its multidimensionality. Sen's contribution to creating an alternative measure of improvement in quality of life has made him one of the main theoreticians of human development. For Sen, development is associated with people's capability to live the kind of lives that they value (Sen, 1999).
The philosophical thinking of the CA provides the basis for creating the human development paradigm, which seeks to redirect the discussion about the concept of wealth toward what people are able to do or be. The CA differs from the utilitarian approach, which explains people's level of satisfaction based on the amount of goods and services that enable them to have a particular lifestyle (Fukuda-Parr, 2003; Robeyns, 2017). CA analysis is based on the concepts of capabilities, functioning, and agency (Alkire, 2005; Robeyns, 2017; Sen, 1998, 2005; Sugden & Sen, 1986). Capabilities are what people are free to do, functioning is what people actually do (P. Anand et al., 2009), and agency is people's ability to pursue the goals they set voluntarily. A person without agency performs crucial activities in life as an obligation (Alkire, 2005).
Notably, before analyzing functionings from a normative perspective, the CA suggests that their neutrality be recognized, which refers to the action (functioning) of generating results, which can be valued positively or negatively. Therefore, if an action is evaluated negatively, it is not excluded as a functioning (Robeyns, 2017). Accordingly, the analysis of entrepreneurship as a functioning implies recognizing its neutrality; in other words, being an entrepreneur does not depend on the impact of the business on society, but on the action of creating a new business itself. Once the entrepreneurial action has taken place, the person who carries it out and society establish value judgments about its expediency
Gries and Naude (2011, p. 217) defined entrepreneurship as "the resources, processes, and state of being through and in which individuals utilize positive opportunities in the market by creating and growing new business firms." This definition is normative in the CA framework because it values or validates only entrepreneurial activities that have a positive impact on quality of life.
The GEM classifies entrepreneurs into different types according to their motivations for becoming entrepreneurs (opportunity vs. need) and type of economic activity (Reynolds et al., 2005). Based on the recognition of the conceptual neutrality of functionings, necessity entrepreneurship is a functioning. Opportunity entrepreneurship...
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