Working Paper No. 1170

Schumpeterian Entrepreneurship in Europe Compared to Other Industrialized Regions

Published: May 16, 2017, revised June 2018Pages: 33Keywords: Billionaire entrepreneurs; Innovation; Institutions; Regulation; Schumpeterian entrepreneurship; Self-employmentJEL-codes: L50; M13; O31; P14

Schumpeterian Entrepreneurship in Europe Compared to Other Industrialized Regions Magnus Henrekson and Tino Sanandaji


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.​

Magnus Henrekson

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magnus.henrekson@ifn.se

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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