Not many researchers go through the trouble of systematically listing studies carried out on a particular topic. And that means they miss seeing the bigger picture. Considering its impact, it was remarkable that no-one had ever systematically listed the costs of, and income generated by, entrepreneurship for our economy.
Until now, that is. According to an overview produced by Amsterdam Center for Entrepreneurship, entrepreneurs are a force to be reckoned with. They are big creators of employment, both directly and indirectly. Businesses set up by entrepreneurs contribute tremendously to employment growth, even if many go belly-up early on. But the overall net effect is positive, particularly in the somewhat longer term. This is not only because young companies grow faster than established companies, but also because of the indirect long-term effect: new businesses create a competitive climate which forces established businesses to either become more efficient or to leave the market. This also creates jobs.
While entrepreneurs boost labour productivity and economic growth in general, the actual gross national product, or the scale of the economy, is largely determined by established companies. That means both are needed for a healthy economic climate. The same applies to innovation, which is equally supported by entrepreneurs and established businesses. Established businesses can offer economies of scale when it comes to innovation, both as regards the production of innovative products, and their services. But if entrepreneurs come up with innovations, they do this more efficiently. Moreover, their innovations are generally more successful. Entrepreneurs also contribute greatly to the marketing of innovations, selling relatively more innovative products.
While these data are important to economists, they are not the be all and end all. What really matters is how people in general benefit. And what do we find?
Entrepreneurs make their employees happier than non-entrepreneurs. The wages may be lower, and there may be fewer employment benefits, but people working for entrepreneurs are happier with their work than employees in established companies. Moreover, entrepreneurs are the happiest with their own work, even happier than employees. Again, this is remarkable as they tend to earn less and their income varies. Also, they work harder. Still, studies have shown that both in Europe and in the United States entrepreneurs take more pleasure from their work. This is because, on the whole, they are happier people: job satisfaction is greatest for people who decide to become entrepreneurs, compared with someone who decides to work for a company, or switch jobs.
The joy of entrepreneurship seems to be explained by the actual content of the work and the perception of being independent. But studies show that this doesn’t explain everything. Maybe entrepreneurs are simply happier because they make a significant contribution to the economy as a whole.