Dissertation Proposal - IDEALS @ Illinois

Despite measurement problems, entrepreneurial support programs are popular and effective ...... managing, bookkeeping, marketing, taking out the trash, etc.
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© 2009 Sarah A. Low

DEFINING AND MEASURING ENTREPRENEURSHIP FOR REGIONAL RESEARCH: A NEW APPROACH

BY SARAH A. LOW B.S., Iowa State University, 2002 M.S., Purdue University, 2004

DISSERTATION Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Agricultural and Consumer Economics in the Graduate College of the University of Illinois at Urbana-Champaign, 2009

Urbana, Illinois

Doctoral Committee: Professor Andrew M. Isserman, Chair Professor Edward Feser Professor Geoffrey J. D. Hewings Professor Randall Westgren, University of Missouri

ABSTRACT

A strong correlation might exist between entrepreneurship and long-term regional employment growth (Acs and Armington, 2003). Entrepreneurship may be a more sustainable economic development strategy than alternatives, like industrial recruitment, because entrepreneurs tend to locate in their home region. Research and policies on fostering entrepreneurship are hindered, however, by the lack of a clear definition and measure of entrepreneurship (Bruyat and Pierre-Andre, 2000). Multiple definitions of entrepreneurship, often flawed, lead to contradictory findings that fuel policymaker confusion (Tamasy, 2006). Most importantly, the commonly used measures of entrepreneurship ignore innovation—a long established defining attribute of entrepreneurship for economic development. This is problematic because only a fraction of new businesses are innovative (Audretch, 2005). Reliable measures of entrepreneurship must be developed to make possible better economic development research and more effective economic development strategies. In this dissertation, I develop a definition and regional measure of entrepreneurship that will aid entrepreneurship research and economic development policy. I address defining and measuring entrepreneurship, posit a comprehensive definition of entrepreneurship, and develop a method for measuring entrepreneurship that does not ignore the innovation attribute. I test the relationship between economic growth and the new entrepreneurship measures, and estimate the determinants of entrepreneurship using the new measures. The measure I develop is unique, differing from other available measures because it measures the most innovative of entrepreneurs. Chapter 1 motivates the need for a different regional measure of entrepreneurship. Chapter 2 posits a three-part definition of entrepreneurship, with roots in the work of early entrepreneurship scholars including Schumpeter, Knight, and Say. Chapter 3 reviews current measures of entrepreneurship and compares them to the I present a multifaceted definition of entrepreneurship and create an annual county-level indicator that incorporates innovation—a commonly overlooked aspect of entrepreneurship. The lack of a clear definition and measure of entrepreneurship hinders the research informing entrepreneurial support policies (Bruyat and Pierre-Andre, 2000). Confusion amongst ii

policymakers arises from definitions that are either incomplete or contradictory (Tamasy, 2006). Despite measurement problems, entrepreneurial support programs are popular and effective economic development strategies. Since entrepreneurs often locate in their home region, entrepreneurial support may prove to be a more effective economic development strategy than prominent strategies such as industrial recruitment. Stronger economic development research and more effective economic development strategies require more reliable measures of entrepreneurship. Chapter 4 develops new indicators of entrepreneurship that capture all three components of the proposed definition. The identification of innovative industries, industries with high level of skill, technology, patents, churn, and employment growth, using detailed NAICS (North American Industrial Classification System) industry data, represents an important contribution of this dissertation. By applying the innovative industries to single-unit employer establis