Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1170: Schumpeterian Entrepreneurship in Europe Compared to Other Industrialized Regions

Magnus Henrekson () and Tino Sanandaji ()
Additional contact information
Magnus Henrekson: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Tino Sanandaji: Institute for Economic and Business History Research (EHFF), Stockholm School of Economics

Abstract: Cross-country comparisons of entrepreneurship are difficult due to the lack of standard empirical definitions of entrepreneurship. Measures focusing on small business activity and self-employment suggest that Europe has the same or higher rates of entrepreneurship than the U.S. and East Asia. However, most business activity is not entrepreneurial in the Schumpeterian sense. We rely on empirical measures that more closely tally Schumpeterian entrepreneurship: self-made dollar billionaires per capita who earned their wealth by creating firms, top global firms founded in recent decades, unicorn startups, and VC investment as a share of GDP. Western Europe is shown to underperform in all four measures of high-impact Schumpeterian entrepreneurship relative to the U.S. Once we account for Europe’s strong performance in technological innovation, an “entrepreneurship deficit” relative to East Asia also becomes apparent. This underperformance is missed by most standard measures. Finally, we also find that China performs surprisingly well in Schumpeterian entrepreneurship, especially compared to Eastern Europe.

Keywords: Billionaire entrepreneurs; Entrepreneurship; Innovation; Institutions; Regulation; Self-employment

JEL-codes: L50; M13; O31; P14

Language: English

33 pages, First version: May 16, 2017. Revised: June 29, 2018.

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