Frédéric Delmar EMLYON Business School & Research Institute of Industrial Economics Karl Wennberg

1. Frédéric Delmar EMLYON Business School & Research Institute of Industrial Economics Karl Wennberg Imperial CollegeLondon & Stockholm School of Economics of Economics Social Conditions for Growth – from Employment Programs towards Ambitious Entrepreneurship

2. Today’s Agenda • Entrepreneurship as self-employment(“the petty bourgeoisie”) • Growth oriented Entrepreneurship • What is the situation in Sweden? Some empirical Evidences • Policy implications and practical applications?

3. Dan Johansson and Magnus Henrekson surveyed the literature or ‘gazelles’ – finding that more than 50% of all new jobs created are created by a small proportion of high-growth firms Source: Johansson and Henrekson (2008) I. Entrepreneurship as Self-Employment (1) • Sweden has higher rates of self-employment (eget företag) than many OECD countries, including USA… (Shane, 2008) • But the level of ambitious (growth-oriented) entrepreneurship is comparatively very low …

4. I. Entrepreneurship as Self-Employment (2) • A majority of Swedish self-employed are ‘combiners’ – i.e. employees with a firm ‘on the side’ (Wennberg, Folta & Delmar, 2008) • Few full-time entrepreneurs by international comparison (GEM report, 2007)

5. Source: Fritsch and Schroeter (2009) Instead of encourage self-employment, encourage growth! I. Entrepreneurship as Self-Employment (3) Michael Fritsch and Alexandra Schroeter in Germany finds that there is an “optimal” level of start-up activity, i.e. too little or too much is not good!  Instead of encourage self-employment, we should encourage growth-oriented entrepreneurship!

6. So what is “good” entrepreneurship? • Entrepreneurship as self-employment(“the petty bourgeoisie”) • Growth oriented Entrepreneurship • What is the situation in Sweden? • What can be done?

7. II. Growth-Oriented Entrepreneurship (1) Growth oriented entrepreneurship in cities Source: Sternberg, Bosma Acs (2008)

8. II. Growth-Oriented Entrepreneurship (2) Stockholm – an Entrepreneurial hotspot? Any entrepreneurship Growth oriented entrepreneurship Relative differences between city andoverall country Source: Sternberg, Bosma Acs (2008)

9. Some empirical evidence from Sweden? • Entrepreneurship as self-employment(“the petty bourgeoisie”) • Growth oriented Entrepreneurship • What is the situation in Sweden? • What can be done?

10. III. Our Research Project(1): Framework • Entrepreneurial firms learn from similar others • They grow to achieve sustainable profit that are comparable to similar others (their aspiration level) • The importance of feedback loops • Two types of learning: • Rational learning, “the more the better” • Behavioral learning, “it is good enough” • Learning changes as firms evolve in age and size • Barriers to growth vs. barriers to survival Source: Delmar & Wennberg (2009)

11. III. Our Research Project(2): The Model Probability Cut–off ? Rationallearning? Behaviorallearning? Probability of growth Probability of survival Age and/or size of new venture

12. III. Our Research Project (3): The data • The effect of social comparison of profitability among 14,700 Swedish knowledge-intensive consultant Firms (IT-Consultants, Engineers, etc) • Data: FAD & LOUISE • Independent incorporations (Aktiebolag)started 1995-2002 • The variable of investigation isemployment growth Source: Delmar & Wennberg (2009)

13. III. Our Research Project (4): The Measures • We measure a bunch of cool things: • Earnings per employee (industry mean and for each firm) • Threat rigidity ( =firms in crisis) • Age, size, age*size • Survival bias • We are interested in differences withinfirm’s evolution over time rather than differences between firms

14. III. Our Research Project (4): The Results • Firm behavior changes over age and as firms grow • “the aspiration level” drives growth • Firms acts rational when young and small • If things goes well (above aspiration)  invest more • Firms more satisfied above a certain age and size: • If things goes well  no need to invest • If things goes poor  invest more • Cut-off point: 5 to12 employees and 5 to 6 yearsold

15. III. The next research project… • The next project investigate effect of social norms for start-up behavior among 682,154 persons in 68 countries • Data: Global Entrepreneurship Monitor 2000-2007 • Results: Social norms have three times as much impact on probability of entrepreneurial entry compared to a person’s own attitudes • Half of the variance in individual-level entrepreneurial behaviors resides in between social groups Entrepreneurship is a social phenomenon – difficult to rapidly change with policy measures – but once entrepreneurial attitudes are in place (lGnosjö) they are likely to persist over time – take Stockholm or Munich as good examples and learn from these! Source: Autio & Wennberg (2009)

16. Some empirical evidence from Sweden? • Entrepreneurship as self-employment(“the petty bourgeoisie”) • Growth oriented Entrepreneurship • What is the situation in Sweden? • What can be done?

17. IV. What can be done? (1) • We know that entrepreneurship is consistently higher in some regions • True both for people born there and people moving there, natives as well as immigrants, high educated as well as low educated • How does the interaction between culture/norms AND economic policies affect entrepreneurship? • The importance of suitable role model • Good policies comes from in-depth knowledge of firm behavior

18. IV. What can be done? (2) • Search for profits leads to growth, not the other way around • “Suitable profits” defined by social surrounding • Growth as a process with important steps that the entrepreneurs need help to overcome: • Knowledge • Behavior • Structure • Better communicate both the advantages and disadvantages of growth - Management & entrepreneurship - Stability and development