Entrepreneurship And Economic Development

Soon after the central government put forward the slogan of "mass entrepreneurship and innovation", a wave of innovation and entrepreneurship has been emerging domestically. However, since the public is not fully informed of entrepreneurship, there exists many misunderstandings. It is an urgent problem to be solved that to form a good entrepreneurship environment to encourage high quality entrepreneurship and combine entrepreneurship with supply side reform.Based on the review of related domestic and overseas literature, the content of the thesis is mainly from two aspects:Firstly, discuss the factors that determine entrepreneurship and explain why different countries have different level of entrepreneurship. View entrepreneurship as a process from born to death in the point of life cycle. Distinguish the factors that influence entrepreneurship from two perspectives:macro level and micro level. The macro level considers the similarity in country, which mainly refers to the institutions (formal and informal institutions) that affect entrepreneurship. The micro level considers the similarity in individual, which mainly refers to the individual heterogeneities (sex, age, household size, education, entrepreneurship capacity, income class, social relation, opportunity perception, psychological factor) that affect entrepreneurship.Secondly, illustrate the reason why we should study entrepreneurship and the type needed by a country in its economic development process from theoretic and empirical view. The majority of research is mainly about the relationship between entrepreneurship and economic growth and does not show the route that entrepreneurship affects economic development. So there remains a huge space to improve. The thesis constructs a theoretic model to study the way that entrepreneurship affects economic development, and quantitatively analyse how entrepreneurship influences economic development by using cross country data.The main conclusions are as follows:Firstly, entrepreneurship incidence is mainly affected by informal institutions and the failure rate of entrepreneurship is mainly affected by formal institutions. In high income countries, constrains of formal and informal institutions to entrepreneurship are small; while in middle income countries, constrains of formal and informal institutions to entrepreneurship are large. The entrepreneurship mode is quite different between high and middle income countries. Possibly because that the institutions in high income countries are complete, people there can make the choice of whether to start a business and what kind of business to conduct freely, which is totally opposite in middle income countries. In middle income countries, the more the culture encourages entrepreneurship and recognizes entrepreneur as a desirable occupation, the higher the public entrepreneurship incidence is; but culture encouraging innovation inhibits entrepreneurship incidence, maybe that it requires high individual ability, thus discourages people to start a new business. Heavy burden of tax is the main source that leads to the failure of entrepreneurship. In middle income countries, the tax institutions for small and middle size entreprises are not complete, which restricts the development of small and middle size entreprises.Secondly, entrepreneurship capacity is the very key factor that influences entrepreneurship among the individual heterogeneities. The stronger the capacity of entrepreneur has, the higher the survivor rate of entrepreneurship is. Thus, the entrepreneur's cumulated knowledge, experience and skills are vital for the running of a business. Age has an inversed U-shape influence on entrepreneurship incidence, but does not affect the failure rate of entrepreneurship. Generally, since age has an inversed U-shape influence on entrepreneurship incidence, it will be the same for the failure rate of entrepreneurship due to the synchronism of entrepreneurship incidence and failure rate. The result is not so, which infers that older entrepreneur may have more experience to help them operate a corporation, so age does not influence the failure rate of entrepreneurship even old people cannot compete young people in physical condition. High educated people may not choose to start a business for the high opportunity cost to do so in middle income countries. People in higher income class may be more likely to start a business and the failure rate of entrepreneurship is also lower for them.Thirdly, construct a theoretic model to analyse the mechanism of entrepreneurship on economic development. The model shows the dynamic evolution path of the equilibrium of an economy and discloses the source of economic destruction, which is innovation entrepreneurship. Innovation entrepreneur ship can change the existing conditions of the number of research department, technology rate and innovation rate, which destroy the existing equilibrium and enable the economy to reach a new equilibrium. In this process, innovation entrepreneurship can raise economic growth, upgrade the industrial structure and improve distribution structure, which ultimately promote economic development. However, although common entrepreneurship can augment employment, the effect on economic growth, industrial structure and distribution structure is ambiguous.Fourthly, innovation entrepreneurship can not only increase the economic amount, but also upgrade the economic structure and promote the structural transition. The share of innovation entrepreneurship increases by 1%, the economic growth inceases by 0.388%. Innovation entrepreneurship facilitates the industrial structure upgrade from algricultrure to non-algriculture. The share of innovation entrepreneurship increases by 1%, the unemployment rate decreases by 0.0235%. Meanwhile, innovation entrepreneurship has a significant positive effect on structure upgrading for middle income countries, but not for high income countries. What's more, the transmission from innovation entrepreneurship to economic development is mainly from two ways:on one hand, through upgrading industrial structure to increase economic growth, thus to promote economic development; on the other hand, through decreasing the unemployment rate to enhance income per capita which reducing income inequality, thus to promote economic development. However, although common entrepreneurship can decrease unemployment rate, its effect on economic growth, industrial structure and distribution structure is not significant.Finally, propose policy recommendations from the perspectives of design, drawing up and execution of formal institution, promotion and cultivation of informal institution, as well as the support of innovation entrepreneurship.