HOBA 2016_PROCEEDINGS

www.hoba.gr

3rd International Open Conference on

BUSINESS & PUBLIC ADMINISTRATION
2016

CONFERENCE
PROCEEDINGS

Edited by: Dimitrios A. Giannias &
Eleni Sfakianaki,

HELLENIC OPEN UNIVERSITY

Athens 2016
ISBN: 978-960-538-990-1
HELLENIC OPEN UNIVERSITY

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CONTENTS

PUBLIC UTILITIES PRIVATIZATION IN OPEN ECONOMY: A LITERATURE REVIEW 5

ENTREPRENEURSHIP TARGETING POLICIES, TECHNOLOGICAL GROWTH, AND
UNEMPLOYMENT....................................................................................................... 15

FOOD SECURITY IN TRANSITION ECONOMIES: THE CASE OF UZBEKISTAN37

THE ENTREPRENEURIAL COMPETENCIES OF SMALL AND MEDIUM ENTERPRISE
MANAGERS IN THE KINGDOM OF BAHRAIN.......................................................45

IMPACT OF FINANCIAL CRISIS ON ORGANISATIONAL BEHAVIOUR & JOB
SATISFACTION: HOW CAN CORPORATE LEADERSHIP ASSIST?......................65

FINANCIAL EFFECTIVENESS OF MUNICIPALITIES IN GREECE AND THE USE OF
MODERN FINANCIAL TOOLS...................................................................................77

HUMAN CAPITAL AND PERFORMANCE APPRAISAL IN THE PUBLIC SECTOR: AN
EMPIRICAL INVESTIGATION FROM EMPLOYEES’ AND SENIOR MANAGERS’
PERSPECTIVE .............................................................................................................87

BUSINESS STRATEGY AND MANAGEMENT OF RISKS AND CHALLENGES .. 103

STUDY ON EXPRESSWAY MARKETIZATION IN CHINA.................................... 119

STUDY ON THE SUPERVISION MECHANISM OF PUBLIC POLICY IMPLEMENTATION IN
CHINA ......................................................................................................................... 123

THE INTERNET THINKING INFLUENCE ON THE PUBLIC HUMAN RESOURCE
MANAGEMENT REASERCH - BASED ON THE PERSPECTIVE OF “CHAORD THEORY”
..................................................................................................................................... 127

ANALYSIS OF SUPERVISION MEASURES IN LOCAL NETWORK MARKET ... 133

A SURVEY ON THE PUBLIC’S SMOKING AND SMOKING CONTROL IN HANDAN CITY
..................................................................................................................................... 137

THE GUIDING OF LOW-CARBON LIFE ................................................................. 141

A PERSPECTIVE ON THE ANTI-CORRUPTION ACCUMULATED FUND SYSTEM---- AN
EXAMPLE OF JIANGMEN CITY IN CHINA ........................................................... 145

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THE PROVISIONS ON MIGRANTS SMUGGLING IN THE UN CONVENTION AGAINST
TRANSNATIONAL ORGANIZED CRIME AND IN THE HELLENIC LEGAL ORDER. THE
MANAGEMENT OF THE HELLENIC SEA BORDER BETWEEN HELLAS AND TURKEY IN
THE PERIOD 2006-2012 ............................................................................................. 149

STUDY ON THE BRAIN DRAIN OF GRASS-ROOTS CIVIL SERVANTS IN CHINA167

STUDY ON JOB BURNOUT PROBLEM OF PRIMARY CIVIL SERVANT DURING THE
TRANSITIONAL PERIOD-AN EXAMPLE OF HEBEI PROVINCE, CHINA.......... 171

THE PROVISIONS AGAINST CORRUPTION AND OF TRANSNATIONAL ORGANIZED
CRIME IN THE UN CONVENTION AGAINST TRANSNATIONAL ORGANIZED CRIME AND
IN THE HELLENIC LEGAL ORDER........................................................................ 177

EFFECTIVE COMMUNICATION OF GOVERNMENT DEPARTMENTAL PERFORMANCE IN
PDCA CYCLE ............................................................................................................. 201

STUDY ON CAREER DEVELOPMENT OF FEMALE CIVIL SERVANT IN CHINA205

LITERATURE REVIEW ON THE STUDY OF PRESCHOOL EDUCATION IN CHINA 209

SEARCH AND RESCUE AT THE EAST MEDITERRANEAN SEA. THE CASE OF CYPRUS
..................................................................................................................................... 213

LITERATURE REVIEW ON SELF-GOVERNANCE OF VILLAGERS IN CHINA 221

LITERATURE REVIEW ON URBAN INTEGRATION OF THE RURAL WORKERS IN CHINA
..................................................................................................................................... 225

STUDY ON THE MOTIVATION AND DEMOGRAPHIC FEATURES OF HELPING BEHAVIOR
MORAL MODELS ...................................................................................................... 227

DEMOGRAPHIC STUDY ON TRUST BEHAVIOR OF CHINESE MORAL MODELS233

STUDY ON THE MOTIVATION AND DEMOGRAPHIC FEATURES OF SAMARITAN
BEHAVIOR ................................................................................................................. 239

SUPERVISION OF FINANCIAL INSTITUTIONS REVISITED: THE TRANSITION FROM
BASEL I TO BASEL III. A CRITICAL APPRAISAL OF THE NEWLY ESTABLISHED
REGULATORY FRAMEWORK IN RESPONSE TO THE CREDIT CRUNCH ....... 247

DIVIDEND PAYOUT AND CORPORATE GOVERNANCE ACROSS THE GREEK LISTED
FIRMS ......................................................................................................................... 263

A STATISTICAL STUDY ON THE EQUITY MUTUAL FUNDS IN GREECE ........ 269
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CREATING A PARTIAL SUPPLY CHAIN REFERENCE MODEL FOR THE ENERGY
INDUSTRY .................................................................................................................. 273
ON A DUOPOLY GAME WITH HOMOGENEOUS PLAYERS AND A QUADRATIC DEMAND
FUNCTION.................................................................................................................. 283
STRATEGIC COMPETITION ANALYSIS AND GROUP MAPPING: THE CASE OF THE
GREEK INSURANCE INDUSTRY............................................................................. 289
EUROPEAN YOUTH GUARANTEE: A NEW PATHWAY FOR THE TRANSITION OF YOUNG
PEOPLE TO THE LABOUR MARKET? ................................................................... 305
RESEARCH ON THE REFORM OF THE BROADBAND SALARY SYSTEM OF CHINESE
GRASS-ROOTS CIVIL SERVANTS .......................................................................... 319
AN INVESTIGATION OF THE FACTORS THAT CAN HINDER THE GROWTH OF LOW
COST DIGITAL MARKETING OF INDEPENDENT MUSIC .................................. 325
MUSEUM ATMOSPHERICS : A MARKETING AND AN INTERPRETIVE TOOL335
OFFSHORE SAFETY AND RISK MANAGEMENT: A COMPARATIVE STUDY IN THE OIL
INDUSTRY .................................................................................................................. 341
ENVIRONMENTAL MANAGEMENT ACCOUNTING AND SERVICE ORGANISATION
..................................................................................................................................... 351
A CRITICAL STUDY: HOW GENDER DETERMINES CONSUMER PREFERENCES 359
CULTURE DIFFERENCES OF CHINESE AND AMERICAN TRADITIONAL FESTIVAL
..................................................................................................................................... 365
COMPARING GREEK ACCOUNTING STANDARDS: OLD VS NEW, WHAT ACTUALLY
BELIEVE THE GREEK ACCOUNTANTS ................................................................ 369

4

PUBLIC UTILITIES PRIVATIZATION IN OPEN ECONOMY: A LITERATURE REVIEW
KOSTAS KARAMANIS, Technological Educational Institute of Epirus
EIRINI TRIARHI, Technological Educational Institute of Epirus

1. Introduction
Globally over the last decades, public utilities have undergone significant structural changes. Most of the developed
and developing countries implemented policies leading to privatization and reorganization of state-owned enterprises
(SOEs). These initiatives are justified by the fact that SOEs operating as cumbersome bureaucratic state
organizations with limited expertise could not respond adequately to the new conditions created in the markets, such
as technological developments, increasing customer demands for new services, for highest quality of existing
service, lower prices, etc. Therefore, globally policies started to be implemented leading to the reform of industries
which until then were operating exclusively under state control and supervision. An interesting case is the
telecommunications sector which from the 80s onwards has experienced rapid development and growth worldwide
(Karamanis and Georgopoulos, 2006). In particular, almost all developed and developing countries have
implemented privatization policies of Public Telecommunications Organizations (PTOs) while at the same time
gradually the markets were liberating to the competition and a regulatory framework was establishing.

Internationally, there is a significant number of studies trying to evaluate the impacts of these
strategic changes. In these studies which are based either on empirical econometric analysis either on
descriptive analysis (cases studies), the effects of reforms both at market and enterprise level, are
examined. The purpose of this paper is to record important studies and to draw useful conclusions on the
effects of structural changes in public utilities. As a case study the telecommunications markets will be
analyzed, since in almost all developed and developing countries the telecommunication sector has
experienced a transition process from a highly regulated stated –owned monopoly to a liberalized
competitive market regime. In particular, the impacts of the privatization of the traditional organizations,
introduction of competition and the establishment of an independent regulatory authority related to market
performance indicators such as telephone penetration, amount of investments, prices and quality of service,
employment and labor productivity, will be examined.

2. Telephone Penetration
Of all the recorded studies in this paper, it is found that the implementation of the reform programs has
significantly improved the level of telephone penetration (Thamae, 2015; Gasmi and Virto, 2010; Fink
et.al, 2003; Chung and Ypsialntis, 2003; Li and Xu, 2002; Ypsilantis, 2002; Ros and Banerjee, 2000; Fink
et.al., 2001; Mueller and Lovelock, 2000; Hughes and Phillips, 1999). The number of main telephone
lines, simultaneously being digitized, grew rapidly as did the number of coin -operated machines /
payphones and telecentres (Laffont and N’ Guessan, 2003; Haggarty and Shirley, 2003; Tusubira et.al.,
2002; Dia et.al., 2002). In particular, the competition raised the number of main lines and coin-operated
machines. By itself privatization was negatively correlated with the penetration of main lines, while
appeared to have a positive effect only on the number of coin -operated machines. In the cases where the
privatization took place before the advent of competition, the penetration of main lines became moderate
(Fink et. al., 2003). The telephone penetration was positively influenced when before the privatization, an
independent regulator and an independent regulatory framework were established (Djiofack-Zebaze and
Keck, 2009; Wallsten, 2002; Wallsten, 2001; Galal and Nauriyal, 1995). The greater was the degree of
independence of the regulatory authority of a country, the greater the increase in penetration of main
telephone lines (Montoya and Trillas, 2007; Baudrier, 2001).

Moreover, countries that proceed in the privatization of their national telecommunications operator at
least by 50%, experienced a significant increase of the main telephone lines. Instead, the ensuring of
exclusive provision of basic telecommunications services from traditional telecommunications operators for
a specified period of time, reduced the growth rate of main telephone lines (Wallsten, 2000). In addition, the
impact of the reform on the telephone penetration is not dependent on the country’s per capita income.
There is no evidence to prove that privatization led to a higher increase of the main lines in those countries
with higher per capita GDP (Ros, 1999). In contrast, Lam and Shiu (2010) found out that there is a
bidirectional relationship between real gross domestic product (GDP) and telecommunications development
(as measured by teledensity) for European and high-income countries.

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More specifically, the reform of this sector caused a rapid increase in the rate of penetration of new
telecommunications services mainly in mobile telephony (Thamae, 2015; Gasmi and Virto, 2010; Clarke
et.al., 2003; Ypsilantis, 2002; Ypsilantis, 2002; Xavier and Ypsilantis, 2001; Ypsilantis and Min, 2000;
Xavier and Ypsilantis, 2000; Sato and Ypsilantis, 2000; Yamada and Ypsilantis, 2000; Samarajiva, 2000;
Min, 1999; Min and Ypsilantis, 1999; Bloendal and Dirk, 1997). The introduction of competition related
positively with the growth of mobile telephony market (Djiofack-Zebaze and Keck, 2009). However, the
penetration of mobile telephony was influenced positively by competition only in the case that competition
concerned digital operators (Fink et.al., 2001). Both the ownership and the eventual privatization appeared
to have no clear relation to the market growth (Nicoletti, 2001).

On the contrary, the internet market especially in developing countries presented lower rates of
growth (Thamae, 2015; Laffont and N’ Guessan, 2003; Lee, 2002; Vanyai, 1998; Serra, 1998; Gonzalez
et.al., 1998; Athreya, 1996; Sinha, 1996;). The competition and the privatization had no direct impact on
the growth of users and internet hosts. The internet growth was higher in countries that had democratic
political system, encouraging the entrepreneurship and investment. Additionally, the higher the per capita
income, the installed telephone lines and the use of English language, the higher was the number of internet
users (Giullen and Suarez, 2001). Moreover, significant for the growth of the internet market was the
relation of the internet penetration rate to P/C’s penetration. As higher the P/C’s penetration rate of a
country was, the more positive were the prospects of the specific market’s growth (Lee and Ypsilantis,
2002). In contrast, the monitoring of internet by government organizations resulted in the slowed growth of
this market (Chung and Ypsilantis, 2003).

Finally, extremely important are the findings that the increased penetration of mobile telephony and
the internet has improved the efficiency of telecommunications, and pushed for expansion and
modernization of telecommunications infrastructure (Jha and Majumdar, 1999). The increase in main
telephone lines, which appeared intense in the first years of the reform, decreased after the complete
liberalization of the market due to high competition in mobile telephony (Ypsilantis and Min, 2001;
Sacripanti 1999). However, the study of Gutierrez and Berg (2002) leads to the opposite conclusion, which
is that the growth of mobile telephony either functioning complementary to the fixed telephony either
competitively, significantly increased the main lines level per 100 inhabitants.

As an important problem remained the goal of universal service , since the poorest regions,
particularly in developing countries, continued after the reform of the telecommunications sector to be
excluded from more and better telecommunications services (Haggarty et.al., 2003; Laffont and N’
Guessan, 2003; Tusubira et.al., 2002; Gonzalez et.al., 1998). While, there is no clear conclusion as to
whether the competition was beneficial or not for achieving the goal of universal service (Wen et.al. 2012;
Barros and Seabra, 1999). The study of Lumanto and Kosuge (2005) provides evidence that the
performance of the telecommunications sector after reform is largely determined by how well the
institutions in the reform process work, rather than depending on reform strategies such as privatization,
market competition, creation of a regulatory body, or an increase in the number of players.

In any case, the delay of telecommunications sector reform caused significant negative impacts to the
penetration rate of both fixed and mobile telephone lines, as well as to the extent of use of internet services
(Coldstein, 2003).

3. Investments
Referring to the level of investments, from the examined studies found that this significantly increased in
countries that have reformed the sector in relation to countries that did not release their markets to
competition and the state retained the majority of the traditional telecommunications organization
(Gutierrez and Berg, 2002; Li and Xu, 2002; Ypsilantis, 2002; Ros and Banerjee, 2000; Yamada and
Ypsilantis, 2000; Vanyai, 1998; Gonzalez et.al., 1998). Biancini (2011) concluded that competition
seemingly helps stimulating investment in the most developed areas, but does not seem to have a
significant impact on the less developed ones.

In particular, intense investments are presented in new technologies with focus on optical fiber, thus
enhancing the digital technology, which increased the productivity and efficiency of the sector (Li, 2012;
Madden et.al. 2003; Haggarty and Shirley, 2003; Tusubira et.al. 2002; Heracleous, 2001). Additionally, an

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important percentage of the total investment in the sector is in the mobile telephony market, which
presented rapid growth (Lee and Ypsilantis, 2002).

It also emerged that while public investment declined steadily in recent years, the total investment in
the sector has increased mainly due to considerable investments made by new entrants to the market.
Particularly important was the investment in the fixed spinal infrastructure using the existing infrastructure
of electricity, road network, railway network and bridges consortium (Xavier and Ypsilantis, 2000; Sato
and Ypsilantis, 2000). Lestage et.al. (2013) concluded that greater competitive pressure fosters
infrastructure investment by state-owned incumbents but reduces investment by private incumbents.
Moreover, the entry of foreign multinational companies on the market, either through partnerships or
through acquisitions, significantly increased the level of investment (Athreya 1996; Sinha 1996).

The expansion of telecommunications services which was not combined with an analogous
modernization of infrastructure, has resulted in fewer investments. Furthermore, ensuring a period of
exclusive provision of basic telecommunications services to traditional telecommunications operators had
negative impact on the level of investments (Wallsten, 2000). According to Howell et.al. (2010)
competition between vertically integrated telecommunications providers would likely induce more efficient
and sustainable investment and competition than would separation.

Finally, the establishment of an independent regulatory authority prior to privatization positively
affected the level of investments. Paleologos and Polemis (2013) analysis reveals that there is a strong and
positive relationship between effective regulation and investment. Positive effect on investments also had
the economic situation and the size of country’s population (Gutierrez and Berg, 2002). On the contrary,
the level of investments remained low due to the weakness to implement a successful regulatory policy
(Wallsten 2002; Galal and Nauriyal 1995). The malfunctioning in the independent and impartial operation
of the regulator as well as the government influence at receiving regulatory decisions, prevented potential
investors to invest in the market (Clarke et.al.,. 2003). Overall, the results suggest a higher social rate of
return on telecommunications infrastructure investment for the aggregate economy (Nadiri et.al., 2009).

4. Pricing of Telecommunications Services
The prices in telecommunications services reduced steadily after the sector’s reform. (Djiofack-Zebaze and
Keck, 2009; Parker, 2004; Haggarty et.al., 2003; Min, 1999; Ypsilantis, 2002; Dia et.al., 2002;
Heracleous, 2001; Xavier and Ypsilantis, 2000; Holder, 1998; Vanyai, 1998; Spiller and Cardilli, 1997;
Xavier, 1996).

More specifically, it is clear that the increasing competition (number of competitive companies or
business new entrants’ market share) and the technological advances resulted to a decrease in services
prices. Alike, the prospect of competition (as represented by the number of years which falls short before
the market liberalization) had a strong negative price effect (Boyland and Nicοletti, 2000). As the
competition becomes more intense, the more the average price is falling (Lee and Ypsilantis, 2002; Nicoletti
2001; Galal and Nauriyal, 1995).The fall of price under conditions was also caused by mergers and
acquisitions, which usually intensify competition (Cricelli et.al., 1999).

Instead, the privatization of public organizations by itself without the existence of an independent
regulatory authority did not lead substantially to the reduction of prices (Wallsten, 2001). In addition, the
problems that were presented at licensing new entrants, restricted competition and had eventually
significant effect on the price level (Yamada and Ypsilantis, 2000). A modest reform policy, with many
problems in its implementation, resulted not to reduce the prices. Thus, often resulted to higher prices not
only for mobile telephone services but also for the local and long distance calls (Clarke et.al., 2003).

Regarding the effects of the reform on the level of prices in the individual telephone services, the
results were ambiguous. Specifically, the study of Ros and Banerjee (2000), found that privatization mainly
reduced the connection prices to the telecommunications network and the cost of the minimum local call.
Two other studies (Sato and Ypsilantis 2000; Hughes and Phillips 1999) concluded to the sharp fall of
prices of long distances, international and mobile telephone services. Instead, other studies (Ypsilantis and
Min, 2000; Cho et.al., 1996) concluded that despite the significant fall in prices, however this did not apply
for international services and prices of leased lines, which still remained relatively high. The study of Min
and Ypsilantis (1999) found that stronger price fall was mainly at business market (leased lines) and the
international market. Another series of studies (Tusubira et.al., 2002; Serra, 1998; Gonzalez et.al., 1998;

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Bloendal and Dirk 1997) concluded that the price of international and long distance telephone services
decreased significantly, while the price of local fixed telephony first appeared to increase and then to
decrease very slowly. Ypsilantis and Min (2001) like Sacripanti (1999) observed significant price reduction
both in mobile telephone and internet services, due to the strong competition which prevailed in these
markets. On the contrary, the lack of fierce competition in the leased lines market maintained high lease
prices, thereby reducing the decline in prices for the internet access (Xavier and Ypsilantis, 2001).

Finally, important is the conclusion that the growth of digital technology pushed down the level of
prices (Madden et.al, 2003). However, there is a lack of clarity about what is the impact on one hand of the
reforms and on the other of the technological advances at reduction of prices (Bloendal and Dirk, 1997).

5. Quality of Telecommunications Services
The index of service quality, which is measured cumulatively or disjunctively by the waiting time for

the main telephone lines, the percentage of defects repaired within 24 hours, the annual number of defects
per 100 lines, the average duration of outages and the number of complaints, found to be significantly
improved by the sector’s reform (Parker, 2004; Dia et.al., 2002; Ypsilantis, 2002a; Ypsilantis, 2002b;
Ypsilantis and Min, 2001; Yamada and Ypsilantis, 2001; Samarajiva, 2000; Xavier and Ypsilantis, 2000;
Ros and Banerjee, 2000; Hughes and Phillips, 1999; Sacripanti, 1999; Min, 1999; Holder, 1998; Vanyai,
1998; Gonzalez et.al., 1998; Xavier, 1996). Moreover, Ypsilantis and Min (2000), specialized even more,
studied the rate of the success of the call and the rate of access in order to examine the quality of mobile
telephone services and found that the reform is positively associated with the quality of mobile telephone
services.

The growing competition and the privatization of public organizations had a strong positive effect not
only on the previous performance indicators, but also on the quality of provided services (Nicoletti, 2001;
Boyland and Nicoletti, 2000; Spiller and Cardilli, 1997). A positive effect on the quality of services had
also the definition of the regulatory policy and the establishment of an independent regulatory authority
(Fink et.al., 2001, Serra 1998; Galal and Nauriyal, 1995). Instead, the limited competition and the
problematic establishment of regulatory authorities fixing the function of the markets, significantly delayed
the improvement of quality (Coldstein 2003; Clarke et.al., 2003; Laffont and N 'Guessan, 2003).

Additionally, very significant impact on the quality had the new technological advances, especially
digitization and modernization of telecommunications infrastructure, such as broadband networks, fiber
optics, etc. (Madden et.al., 2003; Lee and Ypsilantis, 2002; Xavier and Ypsilantis, 2001; Boyland and
Nicοletti, 2000).

However, in some cases, especially in the developing countries, the total quality of services provided
didn’t not present improvement despite the reform of the sector remaining approximately to the levels that
existed before the introduction of the reform (Leong, et.al., 2012; Haggarty et.al., 2003; Tusubira et.al.,
2002).

6. Employment
The total of the examined studies (Li and Xu 2002; Ypsilantis and Min 2001; Xavier and Ypsilantis,

2001; Ypsilantis and Min, 2000; Xavier and Ypsilantis, 2000; Sacripanti, 1999; Cho et.al., 1996) found that
despite staff reductions in traditional telecommunications organizations, total employment in the
telecommunications sector after the reform, increased due to the entry of many new enterprises in the
market.

In the beginning, a decrease in employment in traditional telecommunications organizations was
mentioned, while after the complete liberalization of the market the total employment in the sector
increased (Yamada and Ypsilantis, 2001). Greatest contribution to this increase had the new entrants in the
market of new services such as mobile telephone and internet services (Ypsilantis, 2002; Ypsilantis and
Min, 2001; Giullen and Suarez, 2001; Hughes and Phillips, 1999; Jha and Majumdar, 1999).

7. Work productivity
The telecommunications sector’s reform contributed to the increase in labor productivity, as

measured by the number of subscribers per employee or after dividing the total revenue to employment
(Fink et. Al, 2003; Haggarty et.al., 2003; Laffont and N 'Guessan, 2003; Li and Xu, 2002; Ypsilantis, 2002;

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Lee and Ypsilantis, 2002; Fink et.al., 2001, Ypsilantis and Min, 2000; Xavier and Ypsilantis, 2000; Min and
Ypsilantis, 1999; Holder, 1998; Cho et. al., 1996). Specifically, it is found that the labor productivity
increased rapidly in countries that fully released to competition on the telecommunications market
compared with the countries that have made partial liberalization (Bloendal and Dirk, 1997).

Increased competition and technological advances have improved labor productivity (Fink et. Al.,
2003; Boyland and Nicoletti, 2000). Also, positively to labor productivity contributed the rise in production,
expressed mainly by the level of telephone traffic flows (Madden et.al, 2003), and the reduction of
employees in traditional telecommunications organizations (Dia et.al, 2002). Instead, the impact of
privatization for this performance index was ambiguous (Nicoletti, 2001). Only when the privatization was
combined with the existence of an independent regulatory framework, contributed positively to labor
productivity (Wallsten, 2001). Countries that managed to effectively regulate the market presented
significant improvement in productivity. In countries that failed to implement a successful regulatory
policy, labor productivity did not improve (Galal and Nauriyal, 1995).

However, it is important to be mentioned that high productivity profits, acquired by privatized
enterprises, benefited consumers only when the market experienced a healthy competition (Serra, 1998).
Palcic and Peeves (2010) find no clear evidence that ownership change had a significant impact on
productivity. Improvements were associated with competition and the impending deregulation of the market
as well as considerable changes in the internal organizational structure of the firm.

Conclusions
The world's current policies of privatization of state enterprises with the simultaneous release of the markets
to competition have changed enormously the organization and operation of these markets. Typical is the
case of the telecommunications sector, where applicable reform policies have led to significant changes in
key market performance indicators such as the telephone penetration, the amount of investments, prices and
quality of provided services, employment and labor productivity.

More specifically, the study of the international literature revealed that the level of telephone
penetration has been significantly improved. The number of main telephone lines simultaneously digitized
grew rapidly as also the penetration rate of new telecommunications services, especially of mobile
telephone and internet services. On the contrary, as an important problem remained the goal of universal
service, since the poorest regions, particularly in developing countries, continued after the reform of the
telecommunications sector to be excluded from more and better telecommunications services.

Regarding the level of investments, all the examined studies found that this increased significantly.
In particular, it is observed that while public investment declined steadily in recent years, the total
investment in the sector has been increased mainly due to the significant investments made by the entry of
new enterprises in the market. The major percentage of the total investment in the sector is in mobile
telephony market. Moreover, important were the investments in new technologies with focus on optical
fiber thereby enhancing the digital technology.

Referring to the price index, most of the examined studies found that this declined steadily after the
reform. Increased competition and technological advances reduced the prices of the provided services.

Concerning the quality of provided services, it is proved that the reform has contributed
significantly to their improvement, a fact that attributed mainly to new technological advances and
especially to the digitization of telecommunications infrastructure. However, in some cases the quality of
provided services mainly in the developing countries did not improve, despite the structural changes,
remaining approximately to the levels before the introduction of reform.

Regarding to employment size is revealed that despite the reduction of staff in traditional
telecommunications organizations, total employment in the sector increased mainly due to the entry of new
enterprises in the market. Greatest contribution to this increase had the new entrants in the market of new
services such as mobile telephone and internet services.

Finally, the labor productivity has been increased with the reform of the sector. The competition that
introduced in the market, the rise in production and the reduction of employees in traditional
telecommunications organizations had a positive effect on the productivity level.

9

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13



ENTREPRENEURSHIP TARGETING POLICIES, TECHNOLOGICAL GROWTH, AND

UNEMPLOYMENT
KOSTANTINOS DELLIS, University of Piraeus
SOTIRIS KARKALAKOS, University of Piraeus
COSTANTINA KOTTARIDI, University of Piraeus

ABSTRACT
Technological growth, entrepreneurship, and unemployment influence each other in numerous ways,
forming a trio of inter-related components, yet the literature has traditionally emphasized the endogenous
determination of one or two components of this trio. In this study we intend to elaborate on the
interrelationship between entrepreneurship, unemployment and economic growth in a dynamic context
using vector auto-regressions (VAR) with panel data across 30 OECD countries for a period covering 1970
to 2011. We use data from the Compendia dataset to estimate three empirical specifications for
entrepreneurship, growth, and unemployment. On the right-hand side (RHS) of them there are lags of
entrepreneurship, unemployment, and growth in our benchmark model, which we later enrich by including
control variables according to the relevant literature. Each equation is estimated with Difference GMM and
System GMM estimators. Moreover, an AR(2) model with additional control variables that include the
degree of market capitalization and the equity level is estimated with system GMM. The results are
enhanced by including macro-economic variables such as R&D spending, Taxes and Wage levels in our
specifications. Finally, we use a Propensity Score Matching (PSM) estimator to overcome a selections bias
in a country's decision to perform entrepreneurship targeting.

1.Introduction
The notion of entrepreneurship has gained a place in the epicenter of economic thinking and empirical
research during the past twenty years. Part of this development is the paradigm shift in the majority of the
industrial countries, where small and medium-sized enterprises (SMEs) have increased their activity share
after the 1970s (Wennekers & Thurik, 1999, Audretsch & Thurik, 2001). On top of that, the relationship
between entrepreneurial activity and key macro-economic variables like economic growth, unemployment
and interest rates has drawn the interest of economic scholars generating interesting results and policy
propositions. The key in understanding these relationships is to realize their dynamic nature (Plehn-
Dujowich, 2009). More specifically, entrepreneurship affects economic growth and employment, which in
turn spur feedback effects as well as effects on one another (see for example Galindo&Mendez, 2013). The
purpose of this paper is to analyze the dynamic effects between entrepreneurship, economic growth and
unemployment through a panel Vector Autoregressive Model (VAR) for 30 OECD countries during the
period from 1970 to 2011. Moreover, we estimate dynamic panels for each one of the dependent variables
including two lags and independent variables to control for financial characteristics (market capitalization
and equity financing) as well as macroeconomic variables (Tax revenues, R&D spending and wages).
According to Audretsch & Thurik (2001) the developed countries are undergoing a fundamental shift
towards the knowledge-based economy after the two oil crises in the 1970s. Globalization and the
innovations in the communication sector have diminished the comparative advantage of the developed
countries in the traditional economic activities of the 20th century. This development is followed by the
increased importance of SMEs in the OECD countries. Carree & Thurik (2002) recognize this shift as the
sequence of the two Schumpeterian technology regimes1.They authors summarize the recent developments
as a move from a Schumpeter Mark II to a Schumpeter Mark I regime (see also Wennekers&Thurik,
1999). Complementary to Audretsch & Thurik (2001), Carree & Thurik (2002) identify the increased
demand for variety as income and wealth rose in the advanced economies and deregulation as key drivers
behind this creative destruction. In Europe the role of entrepreneurship and SMEs is highly valued and

1 The Schumpeter Mark I regime describes the process of creative destruction, where the innovative new enterprise renders
the existing technologies and enterprises obsolete. The Schumpeter Mark II regime describes the creative accumulation
undertaken by large firms that outperform small ones by investing in R&D creating feedback mechanisms

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reflected in the ‘Entrepreneurship 2020 Action Plan’ (European Commission, 2012). In the context of the
financial crisis of the past six years, SMEs are considered as a force of potential growth and job creation
(European Commission, 2013), especially in the European South. Moreover, the Entrepreneurship 2020
Action Plan revolves along three pillars; incorporating entrepreneurship in the educational system and
training, removing structural barriers to entrepreneurship and fostering the entrepreneurial culture in
Europe. Darvas (2013) also addresses the problem of SME financing during this time of credit constraints
and corroborates the view that entrepreneurial activity is a priority for solving the Euro-crisis.
Despite its importance the notion of entrepreneurship is not unambiguously defined theoretically and also
difficult to measure empirically (Wong et al. 2005). Wennekers & Thurik (1999) describe it as an ‘[…] ill-
defined, at best multi-dimensional concept’, whereas in one of its publications OECD acknowledges that
the organization has contributed to this confusion since it uses many different definitions in its reports
(OECD, 2008). Galindo & Mendez (2013) underline that innovation is a similar but not synonymous
aspect, because not all innovation takes place in new enterprises and not all entrepreneurs are innovators.
Addressing and assessing the multiple definitions of entrepreneurship is beyond the scope of this paper2,
however measuring entrepreneurial activity is crucial in order to carry out an empirical project. It is quite
evident that, given the theoretical drawback of a lack of definition, identifying the correct variable to
measure entrepreneurship is a burdensome task. Braunerhjelm (2010) notes that it is a set of abilities
embodied in an individual; hence every effort to measure entrepreneurship is bound to be erroneous to a
point. Wong et al (2005) acknowledge the caveats in fully capturing a multi-dimensional concept. The
absence of a consensus on the topic has lead empirical researchers to use different measures of
entrepreneurial activity, which partly explains the variety of results (as noted by Acs & Desai, 2008) as we
shall see in the following section. The strong connection between self-employment and entrepreneurship
and self-employment (see Plehn-Dujowich, 2010) has promoted the use of the share of self-employed over
total employment as a popular measure (Salgado-Banda, 2005, van Stel et al. (2007), Acs et al, 2004 and
Plehn-Dujowich & Li, 2008). Another variable of choice in the empirical literature is the entry and death
rate of firms, which captures the concept of Schumpeterian creative destruction (see Plehn-Dujowich,
2010, Wennekers et al., 2005, Acs & Armington, 2004). Finally, the evolvement of the Global
Entrepreneurship Monitor (GEM) since 1999 and the World Bank Group Entrepreneurship Survey
(WBGES) since 2007 have provided datasets of variables measuring entrepreneurial activity in a variety of
ways3. Van stel, Carree & Thurik (2005), Wong et al. (2005) and Galindo & Mendez (2013) use the GEM
dataset in their research.
The empirical analysis consists of three steps: (1) a panel VAR(1) of three equations linking
entrepreneurship, growth and unemployment, where each equation is estimated using differnence GMM
(Arellano & Bond, 1991) and system GMM (Arellano & Bover 1995, Blundell & Bond, 1998), (2) an
econometric model, which allows to take into account the endogeneity (by specifying a dynamic equation),
estimated using the SystemGMM estimator, proposed by Blundell and Bond (1998) and (3) we use the
Propensity Score Matching (PSM) technique to control for the selection bias problem. The policy
characteristic we wish to observe is entrepreneurship targeting, that is if a country is determined to
increase its levels of entrepreneurship as expressed by the ratio of business owners in the labor force. This
paper is organized as follows. We review the literature in Section 2; describe the data sources and the
choice of variables in Section 3; Section 4 deals with the econometric specifications and Section 5
discusses the results of the empirical procedure.

2. Entrepreneurship and Economic Factors
In recent years a strong belief that ‘entrepreneurship’ is a crucial driver of economic growth for both

developed and developing nations has emerged among both scholars and policy makers (see, for instance
Audretsch, Keilbach and Lehmann, 2006 and, for a comprehensive survey, Van Praag and Versloot, 2007).
However, moving from macroeconomic scenarios to the micro foundations of entrepreneurship, since the
seminal contribution by Baumol (1990) we have known that ‘Shumpeterian innovative entrepreneurs’
coexist with ‘defensive and necessity entrepreneurs’, the latter being those who enter a new business not

2 For a thorough overview of the various definitions of entrepreneurship see Braunerhjelm (2010) pp. 9-10.
3 A description of the two datasets, their similarities and differences can be found at Acs & Desai (2008).

16

because of market opportunities and innovative ideas, but merely because they need an income to survive.
For obvious reasons, this kind of ‘survival-driven’ self-employment is particularly diffused in the
Developing Countries (DCs) (see Naudé, 2009 and 2010), where poverty and lack of formal opportunities
in the wage sector often push a large number of people into ‘entrepreneurial’ activities ranging from street
vending to traditional and personal services (in most cases within the informal sector of the economy, see
Ihrig and Moe, 2004; Maloney, 2004). Empirically a world-wide research project, the ‘Global
Entrepreneurship Monitor’ (GEM), has been collecting survey data using standardized definitions and
collection procedures on potential and actual entrepreneurship since 1999, and now covers 60 developed
and developing countries; see Zacharakis, Bygrave and Shepherd, 2000; Reynolds et al., 2005; Acs, Desai
and Klapper, 2008. This project reports the rates of business start-up and of self-employment across
different countries of the world, but makes it clear that these statistics comprise both ‘opportunity-
motivated’ entrepreneurs and those driven by necessity, the latter being defined as those who have started
their own firms as a consequence of the following personal situation: “because they cannot find a suitable
role in the world of work, creating a new business is their best available option” (Reynolds et al., 2005,
p.217).
Several studies have investigated the relationship between entrepreneurship and basic macro-economic
variables, mainly economic growth and unemployment. Most of the studies, as we shall see below,
examine these relationships in pairs, assuming a casual relationship with definite direction. Nevertheless,
theoretical foundations as well as empirical research points out that the effects between these variables are
most likely dynamic and have to be considered and estimated as such. In the relevant literature there exists
a variety of papers considering these pair-wise relationships theoretically and empirically (Carree et al,
2007, Koellinger & Thurik, 2009, Salgado & Banda, 2005, Berthold & Grunder, 2012) .
The first channel estimated is the potential effect of entrepreneurship on economic growth. The traditional
growth theory fails to acknowledge the value of entrepreneurship (Wennekers & Thurik, 1999), since in
the market equilibrium there is no room for the profits of entrepreneurs. In the endogenous growth theory,
however, emphasis is given to the role of the research sector as an engine of growth (Romer, 1986, 1990).
Innovation is considered to be the driving force for technological change in a model of creative
destruction, where incumbents are replaced by innovators who enjoy monopoly profits until the too
become obsolete in the model developed by Aghion & Howitt (1992). Despite the fact that the two
concepts are closely correlated, it must be underlined that entrepreneurship and innovation are not
identical.
Acs & Varga (2004) elaborate on the function of entrepreneurship as reducing the ‘knowledge filter’. In
endogenous growth theory knowledge is assumed to be accessed by everyone serving as a public good
(Audretsch & Keilbach, 2008), however the authors distinguish between this ‘free’ knowledge and tacit
knowledge that cannot diffuse at its entirety. In this case entrepreneurs become the transmitters of this new
knowledge, thereby increasing economic growth. Audretsch & Keilbach (2008) note that, it is because of
the high degree of uncertainty related to knowledge that the entrepreneurs serve as a conduit for the
transmission of new ideas. They confront the risk of the aforementioned uncertainty and create new
knowledge and therefore reduce the ‘knowledge filter’ that stands between knowledge and the
commercialization of this knowledge. In the same line of theory, Block et al. (2012) emphasize the role of
the entrepreneurs in creating innovations to transmit the new knowledge to the market. Innovations are
divided into new-to-market and new-to-firm. The former are calculated as the shares of turnover
attributable to new or improved products in the market, whereas the latter as the same amount in the firm
level. Both of them are modeled against the rate of knowledge-intensive firms, the entrepreneurship rate
and the level of GDP per capita in their analysis. Knowledge intensity appears to have a significant
positive effect on new-to-market innovation; however the entrepreneurship coefficient is not significant.
Nevertheless, the interaction of the two variables proves to increase innovation significantly, thus exposing
a moderation effect of entrepreneurship in the transmission of new knowledge. Moreover, van Stel et al.
(2005) add that apart from generating knowledge spillovers, entrepreneurs increase competition and work
longer hours than wage-earners, thus enhancing economic performance. According to Braunerhjelm
(2010), the positive effect of entrepreneurship and productivity in the micro level is well established in the
empirical literature.

17

Salgado-Banda (2005) uses data for 22 OECD countries during 1975-1998 with GDP growth as the
dependent variable and self-employment as a share of total employment and patents as proxies for
entrepreneurship. Only patents appear to be positively correlated with growth in a dynamic panel including
lagged growth. In the simple cross-section with average growth for 1980-1995 as the dependent variable,
self-employment is insignificant and patents become insignificant once control variables are included.
Berthold & Grundler (2012) estimate a growth regression with a five-year moving average of economic
growth as the dependent variable in a panel of 188 countries from 1980 to 2010. They include
entrepreneurship in the standard growth regression model proposed by Barro & Lee (2005) either through
the self-employment rate or through TEA. They adjust the self-employment rate by the percentage of
micro firms (occupying less than nine employees) in the country to find significant effect on growth. The
results are validated when TEA is included as the entrepreneurship variable. Galindo & Mendez (2013)
estimate three separate panels for growth, innovation and entrepreneurship to find that both innovation
(approximated by number of patents) and entrepreneurship represented by TEA from the GEM dataset
prove to enhance growth significantly. Moreover, signs of feedback are presented since economic growth
promotes entrepreneurship. This concept is addressed also by Carree & Thurik (2007) who argue that firms
take time to adjust to new tastes and new technology. In their specifications with seven period lags, the
immediate effects on growth are positive and significant, while the positive long-term effects fail to show
significance. Audretsch & Keilbach (2008) argue that the ‘entrepreneurship capital’ of a certain region can
increase growth through facilitating the knowledge spillovers and through enhancing regional diversity.
The use data for 440 German regions and conclude that the rate of start-ups, especially high-technology
ones, has a positive effect of growth.. Mueller (2006) also hypothesizes that entrepreneurship ‘penetrates
the knowledge filter’. There is a gap between the creation of knowledge and its commercialization; that is
transforming it into products and processes that contribute to growth. In his study for German regions from
1992-2002 he regresses regional gross values added on the number of new ventures per 1000 employees,
private and public R&D spending to find that new ventures stimulate regional growth. As in Audretsch &
Keilbach (2008), new firms in the high-tech sector prove more effective. Plehn-Dujowicj & Li (2008)
highlight the two contradicting effects of entrepreneurship. On the one hand, there is the positive effect
through innovation (the ‘entrepreneurship effect’) and on the other there is the negative effect because
workers leave production (the ‘production effect’). They conclude that this leads to a non-monotonic effect
of entrepreneurship effect on growth, more specifically an inverted U-shape effect. They test their theory
using data from the NBER-CES manufacturing productivity database for the U.S. for 76 sectors from 1983
to 1999. To capture the non-linear relationship they add a quadratic term which proves to be negative and
significant in all their estimations. The implication of these results is that an optimal level of self-
employment exists. Acs et al. (2004) use a set of 20 OECD countries from 1981-2001 and define
entrepreneurship as the share of non-agricultural self-employed over the total working force. The
interaction term between entrepreneurship and R&D spending proves positive and significant underlining
the complementarities between new ideas and entrepreneurship. Wong et al. (2005) use the GEM database
and distinguish between different aspects of entrepreneurial activity (TEA). However, in their estimations
they find that only High-Potential TEA causes more growth. Average annual growth (1999-2003) for 36
OECD countries is the dependent variable in the analysis of van Stel et al. (2005), who include initial GDP
per capita and the Growth Competitiveness Indicator (CGI) from the Global Competitiveness Report of the
World Economic Forum as controls. They also use an interaction term initial GDP with TEA to check for
non-linearities. According to van der Zwan et al (2013) different types of entrepreneurs are concentrated in
different countries according to the technological environment. That is, a high stock of knowledge in the
economy attracts knowledge-specific activities. The authors employ data for 70 countries from 2001 to
2009 and distinguish between three types of TEA and the level of economic development. They conclude
that it is high-technology TEA that drives the positive relationship between the two variables for all
countries in the sample.
Apart from the conclusions on the positive effect of entrepreneurship on growth, it is of pivotal
importance to understand the bi-directional causality in this nature. Wennekers & Thurik (1999) postulate
a U-shaped relationship between a country’s level of economic development and entrepreneurial activity.
Wennekers et al. (2005) validate this result using a set of 36 advanced economies. Nascent
entrepreneurship is the dependent variable and the concave relationship is confirmed both when per capita

18

income and the innovative capacity index are used as a metric of economic development. The issue of
reverse causality is addressed with two simultaneous equations for growth and entrepreneurship, estimated
with 3SLS, in Audretsch & Keilbach (2008). Growth rate of GDP exhibits a positive significant coefficient
in 75% of the specifications. On average a one percentage point increase in the growth rate increases the
start-up rate by 50%. Given the dynamic nature of this relationship (see Plehn-Dujowich, 2010), a Vector
Autoregressive (VAR) approach is also proposed in the literature. Holtz-Eakin & Kao (2003) estimate a
three equation VAR(1) for Total Factor Productivity (TFP), birth rates and death rates of firms, to capture
the notion of creative destruction and the forces behind it. The impulse response functions reveal that a
productivity shock positively affects birth rates; however this effect dies out quickly. Galindo & Mendez
(2013) reveal a strong feedback effect of growth on entrepreneurial activity in all of their specifications. A
two equation VAR is implemented in the study of Carree et al. (2007), who deduct that the best fitted
relationship is actually L-shaped, indicating that the fall of entrepreneurship with GDP is halted but does
not seem to be reversed. Plehn-Dujowich (2010) estimates a three equation panel VAR to find that past
growth increases the net entry rate in 4 out of 10 sectors (Granger-causality) and that none of the sectors
shows negative feedback from TFP growth on entrepreneurship. Fritsch et al. (2013) include the HP
filtered GDP in the regressors for and find that the cyclical component of GDP has a negative effect on the
annual number of business registrations. This result is concomitant with the implication that different
stages of growth have different effect on entrepreneurship. The relationship between entrepreneurship and
the business cycle is the epicenter of the work of Koellinger&Thurik (2009, 2012). They decompose the
GDP series into trend and cycle components through the HP filter and estimate a VAR (2) model both in a
sample of 22 countries (1972-2007) and for each country individually. The data reveal that an unexpected
1% rise in entrepreneurship (measured as the share of business owners over the labor force) is followed by
a 0.19% increase in real GDP after one period in the global sample. Nevertheless, they fail to establish
Granger-causality from economic growth to entrepreneurship neither in the global nor in the national level.
Another interesting relationship is the one between entrepreneurship and employment. Two diverging
forces are recognized in this relationship (Thurik et al., 2008): The ‘Refugee effect’ according to which
high unemployment leads to higher rates of self-employment (through the unemployment-push effect) and
the ‘Entrepreneurial effect’, which captures the employment opportunities created by start-up firms.
Nevertheless, both effects should be approached with caution, according to the authors. The unemployed
usually possess little human capital and wealth to start a business. Furthermore, high unemployment
usually coincides with periods of economic downturns, where opportunities for new business formation are
restricted. A far as the creation of employment by new firms, their low survival rates renders the total
contribution to employment modest at best. Van Stel & Storey (2004) point out that new firms create jobs
through increased competition to the incumbent firms and through innovation which leads to higher long-
term growth. On the other hand, they underscore the small proportion of the job rate that the new firms
account for, the modest innovation experienced in practice and the variation of employment creation as
mitigating factors. Carree & Thurik (2007) recognize both positive and negative effects of start-ups on
employment. The immediate, direct effect is definitely positive but the medium-term effect governed by
the low survival rate and the crowding-out of incumbents is negative. In the long term, however, supply
side effects kick in and generate employment through innovation and greater competition in the market. In
their seminal paper, Audretsch & Thurik (2001) test the effect of lagged entrepreneurship (measured by
share of self-employed per labor force) on unemployment change for 23 OECD countries for the period
1974-1994. The data is organized into three time cohorts (1974, 1984, 1994) to capture long-run effects.
Lagged entrepreneurship change proves to reduce unemployment in their calculations. Carree & Dejardin
(2011) distinguish between market-room and unemployment push self-employment using data from
Belgian firms for a period between 1999 and 2001. What spurs entrepreneurship is the deviation from the
‘equilibrium’ number of firms in a specific industry in a local market, as well as the local unemployment
rate. In their findings we can see a moderate support of the error-correction mechanism (the convergence
to the equilibrium rate of self-employment) and strong indication of unemployment-push effects in the
entry and exit of firms. Van Stel & Storey (2004) use two different sets of equations for the 1980s and
1990s in Great Britain. Employment change is regressed on the sectorally adjusted start-up rate, population
growth and wage growth to reveal an interesting result. Only the 1990s set indicates a positive effect of
entrepreneurship on employment, possibly revealing the paradigm shift observed in advanced economies

19

towards self employment. Also, augmenting the lag length shows that long-run effects are more prominent.
The same consensus is reached by Audretsch & Fritsch (2003) for Germany during the same time period.
Carree & Thurik (2007) find an S-type relationship when examining the effect of the change in business
owners on employment. Their data for 21 OECD countries foe a time span between 1972 and 2002 give
support to the positive direct effect on job creation, which dies out. Nevertheless, the coefficient for the 6-
year lag of entrepreneurship appears positive which indicates a reversal of the relationship and the
consolidation of long-run supply side effects of entrepreneurial intensity. Noseleit (2011) highlights that
the channel through which entrepreneurship spurs employment is the sectoral reallocation of factors of
production. The existing firms fail to restructure due to high costs and nascent firms usually operate in new
sectors. He analyses data for German regions between 1975 and 2002 using two measures as proxies for
sectoral reallocation. First, the similarity between the activity of new firms and incumbents and second the
similarity between the structure of entering firms and the initial sectoral structure in the region. The
dependent variable is the long-run employment change between 1983 and 2002. Reduced similarity
between entering and existing firms reduces unemployment significantly and so does low similarity with
the initial structure in the region. Acs & Armington (2004) emphasize on the role of entrepreneurship as a
conduit for knowledge spillovers. They also find that new birth rates significantly ameliorate
unemployment. Thurik et al (2008) argue that there exists an optimal level of entrepreneurship and that
deviation from that threshold has a negative effect on employment. However, according to their
calculations, the majority of countries exhibit a lower-than-threshold entrepreneurship level (as measured
by the share of self-employed). Hence an increase towards that threshold is expected to have a diminishing
effect on unemployment. The authors estimate a two equation VAR(2) with unemployment change and
entrepreneurship change as the left-hand side variables. Self-employment is shown to Granger-cause
unemployment to decrease and high unemployment Granger-causes entrepreneurship to increase, giving
support to the ‘Refugee effect’ described above. Fairlie (2013) reaches a similar conclusion in his
examination of 250 metropolitan areas in the U.S. from 1996-2009. The probability of becoming an
entrepreneur is the dependent variable in his empirical specification. An increase in the local
unemployment rate by five percentage points is estimated to increase this probability by 0.04 percentage
points. The currently unemployed are more likely to start a new business than wage earners according to
the results. Fristch et al. (2013) also find that lagged unemployment increases entrepreneurship and Plehn-
Dujowich (2010) concludes that unemployment Granger-cause entrepreneurship in three out of ten sectors
in his 3 equation VAR described above.
Finally, the relationship examined in this stream of literature is the one between growth and
unemployment. The nature of this relationship remains ambiguous (Plehn-Dujowich, 2010, Elsby &
Shapiro, 2011). In their seminal work Pissarides & Vallianti (2004, 2007) argue that the effect of rises in
TFP depends on the extent to wgich new technology is embodied in new jobs. The simultaneous
development of falling productivity and growing unemployment after the 1970s in developed economies
provides the incentive to test whether these developments are correlated. According to Pissarides &
Vallianti (2007) technological improvements generate two choices for a firm: either to upgrade the existing
jobs and keep their employees or to lay off part of its working force. The two choices obviously have
contradictory effects on total employment. In their empirical analysis they show that the semi-elasticity of
employment with respect to TFP growth is 1,23 and significant. This goes to show that a substantial
portion of changes in unemployment can be attributed to decreasing productivity. Blanchard & Wolfers
(2000) argue that it is the interaction of adverse shocks and adverse labor market conditions that explain
the surge in unemployment since 1960. One of these shocks is the deceleration of TFP growth. Using a
panel of 20 OECD countries for a period covering 1960 to 1996, they fins that a fall of 3 percentage points
in TFP growth increases unemployment by 1,5%. Hatton (2002) also considers the institutions and the
shocks as decisive factors in the labor market. He uses a rich dataset for the U.K. covering a period from
1871 to 1990, because productivity growth changes over long time periods. He estimates a two equation
model with real wage change and unemployment as dependent variable. They are both affected by
productivity growth as well as the lagged deviation between productivity and real wage. An increase in
productivity is shown to slow down unemployment; however TFP alone cannot explain the variation in
employment dynamics over time. Benigno & Ricci (2011) implement a three equation VAR model with
drifting coefficients for productivity growth, real wage growth and unemployment. Their calculations

20

show that a one standard deviation rise in TFP reduces the unemployment rate by 0.47 percentage points.
They also add the volatility of TFP as an explanatory variable to find that a one standard deviation increase
in TFP volatility actually increases unemployment by 0.25 percentage points. According to Moreno &
Galbis (2012) the effect is non-linear in the sense that a positive TFP growth change increase
unemployment for unskilled workers and not for skilled or unskilled workers who are getting trained.

3. Data Sources and Descriptive Statistics
Τhe empirical analysis uses data for 30 OECD countries that cover a time span from 1970 until 2011. All
data are taken from the Entrepreneurs International (COMPENDIA) Dataset which combines information
from OECD and ILO databases as well as the European observatory for SMEs. The main variables we use
are entrepreneurship, economic activity and unemployment.
Following Carree& Thurik (2007), Plehn-Dujowich & Li (2008), Acs et al. (2004) among others, we use
the number of business owners as a measure of entrepreneurship (bow). The COMPENDIA Dataset
provides o harmonized series of business owners, since the standards of measurement of the variable vary
across OECD countries. The total number of self-employed in the private sector is included as well as the
number of business owners excluding agriculture, hunting, and forestry and fishing (bowx). To capture
economic activity we include GDP per capita, which is taken from OECD National Accounts and
measured in millions of US dollars at constant prices of 2000, using Purchasing Power Parity (PPP) of the
same year (gdp). The unemployment variable (unemp) measures the number of unemployed divided by the
labor force. The main source for the unemployment data is OECD Main Economic Indicators.
A first review of the data indicates the key variables included in the model. The variable through which we
approximate the notion of entrepreneurship is the number of business owners in the private sector, to begin
with. The mean value in our panel is nearly two-and-a half million people, with the USA exhibiting the
highest value throughout the relevant years with more than fourteen million business owners in the whole
of the private sector of the economy. The lowest number comes from Iceland, which averages nineteen
thousand during the forty years of our sample. Portugal and Greece stand out from the smaller countries as
they present a higher number of business owners than, for example Sweden or Austria. To extend our
analysis and control for the country size we construct a variable that shows the number of business owners
as part of the labor force for each country. Again, the USA account for the highest share with almost 50%,
while the Slovak Republic, Sweden, Denmark and Switzerland are the only countries with an average of
less than 10%. It is interesting to compare the findings for the absolute number of business owners and the
one with the share of business owners over the total of the labor force in each country. While USA and
Turkey lead in both categories, we see that smaller countries like Greece and Ireland have a substantial
share of entrepreneurs if compared to the labor force in Figure 1:

21

AustraliaFigure 1:
AustriaEntrepreneurship by country
Belgium
Canada Business Owners by Country

Czech Republic.5
Denmark
Finland.4
France
Germany.3
Greece
Hungary.2
Iceland
Ireland.1
Italy
Japan0
Korea
Source: COMPENDIA, OECD
Luxembourg
MexicoWe then differentiate the dataset into two sub-groups according to the mean value of the GDP per capita.
Rich countries average more than 20000$ (the mean value in our sample). It turns out that poor countries
New Zealandoutperform the richer ones in terms of both business owners in total and as a share of the labor force.
NorwayAccording to our data unemployment averages near 6%, so we use this threshold to divide the countries
Polandinto high and low unemployment. Countries with relatively high unemployment (average 9%) appear to
Portugalhave a higher number of self-employed both in absolute as well as in relative terms. Moreover, we use
expenditures in Research & Development (R&D) by the state as a divisive factor between countries. It
Slovak Republicturns out that the share of business owners is 3 percentage points lower for countries with R&D
Spainexpenditures higher than 1,6% of GDP, thus implying that poor performance in research by the
government motivates agents to pursue self-employment. Finally, two sub-groups emerge if we account for
Swedenthe share of tax revenues relative to GDP. It is this categorization that provides with the most robust result,
Switzerlandsince a share of tax revenues above 33% of GDP is associated with a share of business owners ten
The Netherlandspercentage points lower than the share of low taxation countries.
As described above the mean value for GDP per capita in our sample is 20900$ with Norway and
TurkeySwitzerland standing at the top of the table. The level of unemployment averages around 6,2%, which is
USAexpected given the construction of our panel from OECD countries. The average unemployment rate for
rich countries (as defined earlier) is 6,6 percentage point in comparison to 5,9 for poorer ones.
United KingdomFurthermore, the differential widens between high and low R&D economies to three percentage points
higher unemployment for high R&D countries.
There are some stylized facts that are worth mentioning. Firstly, taking country averages over time
reveals a modest negative relationship between unemployment and business ownership (Figure 2). Again,
the USA stands out as an observation with a high level of business owners per labor force and relatively
low unemployment.

22

Figure 2
Entrepreneurship and Unemployment – Country Means

Entrepreneurship and Unemployment

.5 USA

.4

.3 KOR GRE

TUR

MEX

PRT ITA

.2 NZL AUS IRE POL
ESP

.1 ICE JAP CZE FIN BCEAFHLNRUAN
AUT NED
NOR
SWE DGNEKR SVK
SLWUXI

0 5 UK 10 15
0
Unemployment

Source: COMPENDIA, OECD

The mapping of the data on GDP against the level of entrepreneurship (Figure 3) produces a somewhat
unexpected outcome, since it indicates that there is a negative relationship between the number of business
owners and economic activity. The effect is more solid once the outliers of USA and Luxembourg are
removed as can be seen below.
Figure 3
Entrepreneurship and GDP – Country Means

Entrepreneusrship and Economic Activity

.5 USA

.4

.3 TUR KOR GRE

MEX

PRT ITA

.2 POL IRE AUS
ESP NZL

CZE FJAINFPRBAEALNCUEAITCDNE

HUN NOR
.1 SVK SWI
DGSNWEKRE LUX

UK 40000

0

10000 20000 30000
GDP per capita

Source: COMPENDIA, OECD

Nevertheless, we have to bear in mind that the relationship between economic activity and
entrepreneurship is a dynamic rather than a static one (Carree et al. 2007, Holtz-Eakin & Kao, 2003,

23

Koellinger & Thurik, 2009). It comes as no surprise then that the nature of this relationship changes once
we deploy yearly means in our analysis. The following graph (figure 4) verifies a robust positive
correlation between GDP and the one-period lagged value of business ownership.

Figure 4
Entrepreneurship and GDP – Yearly Means

GDP and Lagged Business Ownership

30000 2007 2008
25000
20000 2010 2006 2011
15000 2009 2005

2004

200210200002 2003

GDP 1999 1996
1998
1987
1986 1997

1985 1119919191999915928099984839 1991
119918792980 1983
1978 1984
197711997764 1973 1975
1981

.12 .14 .16 .18 .2
Business Owners/Labor Force (t-1)

Source: COMPENDIA, OECD

4. Empirical Analysis
The data construct an unbalanced panel with 30 cross section units (countries) and 42 time observations.
Given the dynamic nature of the relationship between the variables in question we estimate a three-
equation Vector Autoregressive Model (VAR) with one lag. The presence of a lagged dependent variable
in the right-hand side of each equation renders First Difference (FD) and Fixed Effects (FE) estimators
biased. Verbeek (2012) illustrates how the Fixed Effects Estimator is biased and inconsistent and Nickel
(1981) shows the magnitude of this bias as the cross sections of the panel reach infinity. Taking first
differences does not solve the problem since lagged values of the dependent variable are obviously
correlated with lagged values of the idiosyncratic error term. Hence, some form of instrumenting is
required to estimate each regression. Anderson & Hsiao (1981) proposed the two-period lagged value of
the dependent variable (yi,t-2) as an instrument for the first difference (yi,t – yi,t-1) since it is uncorrelated
with ui,t – ui,t-1. Nevertheless, Verbeek (2012) underlines that this IV estimator imposes only one moment
condition in the estimation process. In order to increase the efficiency of the estimators we follow the
methodology suggested by Arellano & Bond (1991) who use a list of instruments to exploit additional
moment conditions in the first-differenced model. For example for t=2 we have one instrument yi0 since
E[(ui2 – ui1)yi0]=0 (1), for t=3 we have two instruments because
E[(ui3 – ui2)yi0]=0 and also E[(ui3 – ui2)yi1]=0. (2)

This results into a total of 1+2+3+…T-1= T(T-1)/2 moment conditions. The instruments are the elements
of each row of the (T-1xT-1) matrix Zi so that E(ZiꞌΔui)=0. The GMM estimator proposed by Arellano &
Bond (1991) minimizes the following expression
[ N-1 Σ Zi' (Δyi – Δyi,-1)] ' WN [N-1 Σ Zi' (Δyi – Δyi,-1)] (3)
, where WN is a positive definite weighting matrix.

In our results this is referred to as the Dynamic GMM Estimator.
24

Arellano & Bover (1995) and Blundell & Bond (1998) move one step further from the Dynamic GMM
Estimator and impose more moment conditions to improve the efficiency of the estimators. The authors
keep the set of exogenous instruments for the differenced equation and add lagged differences of the
endogenous variable as instrument for the level equation as
E(Δyi,t-1uit) = 0 (4)
The estimation of this system of two equations yields the System GMM Estimator which we also report in
our set of results.

5. Results
Our results from the estimation of the three equation Panel VAR(1) follow the lines of Plehn-Dujowich
(2009). It is well known that the magnitude of the coefficients in the VAR has no significant interpretation.
Nevertheless, the sign of these coefficients gives us the indication of Granger-causality of one endogenous
variable to another (Greene, 2003). The results are summarized in Tables (1) and (2) to differentiate
between the use of total business owners and business owners excluding fishing, forestry and agriculture as
the entrepreneurship variable. The odd columns represent difference GMM and the even columns represent
system GMM estimation.
The estimation reveals a positive and statistically significant coefficient for the effect of past
entrepreneurial activity on GDP per capita growth. This effect is more pronounced once the number of
business owners excluding forestry, fishing and agriculture is used as the entrepreneurship variable. The
results show robustness between Difference and System GMM estimations. These findings corroborate the
ones of Plehn-Dujowich (2009) as well as Galindo & Mendez (2013). The feedback effect seems to hold as
lagged values of GDP per capita are estimated to have a positive and significant effect on entrepreneurship
as in Holtz-Eakin & Kao (2003) and Audretsch & Keilbach (2008). On the other hand, this result does not
hold once the System GMM estimator is chosen for the model.
The effect of past unemployment on entrepreneurship is positive yet significant in only two out of six
specifications. The inverse relationship is also somewhat inconclusive. In the VAR where business owners
excluding fishing, forestry and agriculture is the preferred entrepreneurship variable, it is shown to
significantly reduce unemployment as predicted also by Audretsch & Thurik (2001). The use of the total
number of business owners does not yield statistically significant estimators.
Probably the most robust result is the one describing the effect of past unemployment on GDP growth. In
all specifications the coefficient is positive and significant at a 1% level. Moreover, economic growth is
observed to have a positive effect on employment. The coefficient of GDP per capita in the unemployment
regressions is negative and significant in half of them. This provides evidence to the case of
Pissarides&Valliante (2004, 2007) who find strong positive effects of Total Factor Productivity on
employment.

25

Table 1
Panel VAR with total number of business owners

Entrepreneurship GDP Unemployment

Model Model 1 Model 2 Model 3 Model 1 Model 2 Model 3 Model 1 Model 2 Model 3
AH-IV
Estimator Difference System AH-IV Difference System Difference System AH-IV
GMM GMM GMM GMM GMM GMM

Entrepreneurship 0.911*** 1.000*** 0.441*** 0.0238*** -0.000572 0.0540* 0.0801 -0.0507 -2.252**
(-1)
(0.00899) (0.00190) (0.103) (0.00774) (0.00237) (0.0288) (0.232) (0.0857) (1.026)
GDP (-1) 0.0255*** -0.00407 0.103** 0.963*** 0.961*** 0.541*** -0.236* -0.406*** -14.51***
(0.00433) (0.00346) (0.0417) (0.00354) (0.00259) (0.202) (0.125) (0.0939)
Unemployment (-1) 0.000563 0.00178*** 0.000526 0.00251*** 0.00292*** 0.00458 0.884*** 0.937*** (1.871)
(0.000374) (0.000363) (0.00127) (0.000309) (0.000274) (0.00320) (0.0105) (0.00906) -0.0178
Constant 0.354*** 0.0358 0.000760 0.208*** 0.387*** 0.00756 2.664** 4.896*** (0.0786)
(0.0502) (0.0355) (0.00155) (0.0439) (0.0282) (0.00469) (1.325) 0.446***
(1.018) (0.0577)
Observations 1,013 1,043 984 1,013 1,043 1,012 1,013
1,043 1,011
Number of 30 30 30 30 30 30 30
countries 30 30

Standard errors in parentheses
*** p<0.01 ** p<0.05 * p<0.1

26

Table 2
Panel VAR with Business owners excluding agriculture, fishing and forestry

Entrepreneurship GDP Unemployment

Model Model 1 Model 2 Model 3 Model 1 Model 2 Model 3 Model 1 Model 2 Model 3

Estimator Difference System AH-IV Difference System AH-IV Difference System AH-IV

GMM GMM GMM GMM GMM GMM

Entrepreneurship 0.717*** 0.948*** 0.284*** 0.0421*** 0.00451** 0.0463** -0.282 -0.135* -1.658**
(-1)
GDP (-1) (0.00876) (0.00352) (0.0265) (0.00613) (0.00224) (0.0220) (0.183) (0.0804) (0.841)
Unemployment 0.172*** -0.0119** 0.134*** 0.943*** 0.961*** 0.522*** -0.000826 -0.335*** -14.11**
(-1) (0.00747) (0.00569) (0.0486) (0.00494) (0.00283) (0.194) (1.879)
0.00178*** 1.23e-05 -0.000820 0.0022*** 0.0028*** 0.00435 (0.167) (0.103) -0.00394
Constant 0.884*** 0.934***
(0.000507) (0.000579) (0.00130) (0.000306) (0.000277 (0.00301) (0.0806)
) (0.0108) (0.00926)
0.133*** 0.471*** 0.00723*** 0.296*** 0.00763* 0.449***
(0.0464) (0.0535) (0.00167) (0.0282) 0.361*** (0.00445) 2.712*** 4.747*** (0.0601)
(0.0252) (1.019) (0.925)

Observations 1,019 1,049 993 1,019 1,049 1,017 1,019 1,049 1,015

Number of 30 30 30 30 30 30 30 30 30
countries
Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

27

The results in Table (3) refer to the estimation of the linear dynamic panel data model with the use of the
System-GMM estimator (Blundell & Bond, 1998). All three dependent variables show a strong
persistence, which is highlighted by the positive significant coefficient of the lagged dependent variable, as
depicted in the first row of the table. Columns 2,4 and 6 report the results with the inclusion of a second
lag, however it appears to be insignificant in all specifications. The same conclusion holds for the binary
variables indicating common language and the participation in the monetary union. The final two rows of
the table yield significant results for two categorical variables. Firstly, the degree of market capitalization
(dMARK CAPIT) appears to be positively correlated with the share of business owners and GDP. More
specifically, column 1 indicates that an upward shift of one unit in the degree of market capitalization
increases the share of business owners in the labor force by 3,2%. It is noteworthy that the same variable
appears to raise unemployment significantly (columns 5,6). Finally, the degree of equity as a share of
leveraging for enterprises is characterized by positive and significant coefficients for the regressions with
business ownership and GDP as the dependent variable but not so for unemployment. We also perform the
diagnostic check for serial correlation (Arellano-Bond test) in the error terms. Given the fact that the test is
performed in the differenced specification, the null hypothesis of no autocorrelation is strongly rejected for
the AR(1) model. No autocorrelation for the differenced error terms implies that the original error terms
follow a random walk (Greene, 2003). Second order autocorrelation would imply misspecification in the
model; however we fail to reject the hypothesis of no autocorrelation in our specification. In addition, the
output of the Hansen J-test for over-identification is presented at the bottom of the table. The p-values
indicate that we fail to reject the hypothesis that the instruments implemented are valid.

Table 3 GDP Unemployment
Baseline Model

Entrepreneurship

Model Model 1 Model 2 Model 1 Model 2 Model 1 Model 2

Estimator GMM GMM- GMM- GMM- GMM- GMM-
-SYS SYS SYS SYS SYS SYS
Lagged
Dependent 0.979* 0.932* 0.785** 0.937** 0.522* 0.595***
Variable (0.402) (0.473) (0.286) (0.285) (0.217) (0.057)
Lagged (2)
Dependent 0.002 0.289 0.595
Variable (0.012) (0.415) (0.667)
dLUG
0.398 0.452 0.348 0.654 0.657 0.816
dUNION (0.332) (0.332) (0.501) (0.459) (0.476) (0.537)

dMARK CAPIT 0.102 0.175 0.117 0.338 -0.489 -0.366

DEQUITY LEV (0.065) (0.128) (0.230) (0.602) (0.544) (0.244)
0.032* 0.047* 0.039* 0.057* 0.507** 0.697*
Constant Time
dummies (0.014) (0.023) (0.025) (0.032) (0.120) (0.320)
0.185* 0.197* 0.305* 0.426* 0.161 0.266
(0.086) (0.102) (0.171) (0.185) (0.746) (0.847)
Yes Yes Yes
Yes Yes Yes Yes Yes Yes
Yes Yes Yes

N. instruments 64 72 72 75 71 71

Arellano-Bond -7.653 -5.924 -5.367 -6.737 -6.884 -7.781
serial correlation [0.000] [0.000] [0.000] [0.000] [0.000] [0.000]
tests -1.097 0.264 0.293 0.198 -0.359 -0.538

AR(1)
p-value
AR(2)

28

p-value [0.272] [0.792] [0.769] [0.843] [0.720] [0.591]
Overidentification 62.852
test (Hansen J) 107.547 105.190 153.722 83.255 77.310

Chi-squared

p-value [0.976] [0.285] [0.268] [0.003] [0.963] [0.980]

Notes: each equation assumes time dummies as exogenous variables and the lagged y and d as predetermined variables. The
second, third and fourth lags of y and all lags from t-3 of ds are used as instruments

Table (4) enhances the results by taking into consideration key macro-economic variables. Before turning
to their effects, it is worth mentioning that the autoregressive component remains positive an statistically
significant for all dependent variables. On the other hand, the indicator variable capturing market
capitalization loses its significance in all but three regressions and is smaller in magnitude compared to the
results from table 1. The most robust results from the inclusion of macro-economic variables comes from
the R&D expenditures which appear to increase business ownership as well as GDP, a result compatible
with endogenous growth theory. Notably they also have an implied negative effect on employment,
perhaps indicating a substitution effect between new technology and labor. Finally, wages only have a
significant effect on unemployment-positive as expected. The same specification tests are applied in this
set of estimations. Again, we fail to reject the hypothesis of no serial autocorrelation of order 2 for the
error terms and also the results of the Hansen J test point towards valid instruments used in the estimation.

Table 4
Model with Macroeconomic control variables

Entrepreneurship GDP Unemployment

Model Model 1 Model 2 Model 3 Model 1 Model 2 Model 3 Model 1 Model 2 Model 3

Lagged 0.549*** 0.962*** 0.925*** 0.966*** 0.944*** 0(.784*** 0.817*** 0.584*** 0.520***
Dependent (0.121) (0.079) (0.097) (0.062) (0.067) (0.093) (0.062) (0.055)
Variable (00.116)
0.269 0.197 -0.052
. (0.377) (0.664) (0.531)
-0.260 -0.171 -0.086
1 (0.255) (0.336) (0.330)
0.710*** 0.762** 0.766*
8 (0.254) (0.378) (0.423)
2.343 0.510 0.519
dMARKET CAP t-1 -0.004 -0.013 -0.004 0.028* 0.023* 2- 0.031* (3.172) (1.466) (1.452)
i, (0.020) (0.014) (0.008) )0 0.342* 0.303*
0.015 0.009 0.021 (.(0.015) Yes (0.157) (0.156)
dLUG (0.035) (0.031) (0.014) (0.016) (0.034) 0-20.243 Yes 0.351*
0.024 0.025 0.041 0.023 0.519* 900.4***0)7.)0.130(3(04(0.548)2.09.04476(((.2061.(.0022301....6.0231307173552**04636*))))* Yes (0.152)
Popit (0.034) (0.034) (0.033) (0.032) (0.245) 47 Yes
Taxi, t-1 -0.030 0.016 0.040 0.518 0.071 Yes
(0.041) (0.012) (0.034) (0.232) (0.073) 74 Yes
0.291*** 0.042 0.054 0.139***
Yes (0.030) (0.030) 90
RDit Yes (0.027) (0.073)
Yes 0.178*** Yes
Yes Yes
Wageit (0.035) 7 0.131
0.078 8
Constant (0.097)
Time dummies Yes ) (0.105)
Yes
Yes YYes
Yes YeYes
es
N. instruments 53 69 51 67 67 s
Arellano-Bond
5 65
3

29

serial correlation

tests

AR(1) -3.482 -5.713 -5.329 -8.407 -8.230 --5.021 -5.605 -6.408 -6.535

p-value [0.000] [0.000] [0.000] [0.000] [0.000] 4 [0.000] [0.000] [0.000]
-0.368 0.447 0.102 2.150 2.112 0[.000]07.[.401[[206.8001...013076018]] 1.663 -0.690 -0.822
AR(2) [0.713] [0.655] [0.919] [0.032] [0.035] 7671.598 [0.096] [0.490] [0.411]
56
p-value 44.934 103.527 81.151 116.268 107.451 ][.3[0.986] 57.635 91.144 117.891
Overidentification
test (Hansen J) [1.000] [1.000] [1.000]

Chi-squared

p-value [0.949] [0.306] [0.891] [0.700] [0.855]

02

.4

In the final set of estimations we perform the Propensity Sc6ore Matching (PSM) technique to control for

the selection bias problem. The policy characteristic we wish0to observe is entrepreneurship targeting, that

2

is if a country is determined to increase its levels of entrepre]neurship as expressed by the ratio of business

owners in the labor force. In order to take this issue into account, several solutions have been proposed

in the literature. In particular, considering that our measure of investment is dummy taking value 1

when a country changes status from non-entrepreneurial to entrepreneurial, one could apply propensity

score matching and difference-in-difference estimators (Blundell and Costa Dias, 2000). The idea of

these techniques is that endogeneity can be accounted for by selecting a control group of countries with

characteristics very similar to the sample of countries actually increasing their share of business owners.

Following the literature (Rosenbaum & Rubin, 1983, Heckman, Itchimura & Todd, 1998) we estimate a

logit model to assess the impact of several economic variables on the probability of adopting

entrepreneurship targeting. The second step is to estimate the difference in the outcome variable, here GDP

and Unemployment between a country in the treatment group and its nearest neighbor in the control group.

The logit models are estimated using variables chosen to reflect the characteristics of an economy

accounted for in the decision of whether to be an entrepreneurship targeter or to adopt some other type of

policy, such as low unemployment targeting. The goal of estimating the propensity score is not to find the

best statistical model to explain the probability of policy adoption as the conditional independence

assumption implies that it is legitimate to exclude variables that systematically affect the probability that a

country adopts entrepreneurship targeting but do not affect the economic outcomes in the logit regressions

(Persson, 2001). All variables are expected to be positively correlated with the probability that a country

will adopt entrepreneurship targeting.

Table 5
Logit Model Propensity Score Estimates

High Market Capitalization Countries Low Market Capitalization Countries

Model Model 1 Model 2 Model 1 Model 2
Baseline Baseline Low Unemployment
Lagged Low Unemployment
Entrepreneurship 0.397*** Countries 0.103*** Countries
R&D 0.460 0.091**
Lagged Tax 0.170 1.280
Wage 0.019 0.13 1.110*** 1.340
Population 0.040 1.653* -1.111
2.84 2.160 3.190 -3.050
0.003 2.020 -2.940 -2.510
-0.010** 0.004 -0.18 -0.019
-0.023** -0.020 -0.020
-1.96 -2.750 -3.190 -3.120
1.114 1.305 1.658 1.447

30

Constant 0.005 1.504 0.008 0.009
Pseudo-R square -1190 1.540 2.413*** 2.359***
1.480 3.870
-1.810 0.281 4.040 0.139
0.123 0.140

Note: t-statistics are reported below the coefficients *, **, and *** indicate significance at the 10%, 5%, and 1% level respectively

The results of the estimation of the propensity scores of the baseline model of equation (1) are reported in
Table (5). Past entrepreneurship is undoubtedly a key driver towards entrepreneurship targeting in all
specifications. Also R&D spending has a positive effect on the probability of increasing business
ownership, while wages seem to have the opposite effect. Most of the coefficient estimates from the model
for both the High Market capitalization countries and Low Market capitalization countries group have
signs in accordance with expectations. The main exception is for the entrepreneurship term for the
developed countries which is positive here in contrast to negative coefficients in Ball and Sheridan (2004);
Lin and Ye (2007, 2009); de Mendonça and de Guimarães e Souza (2012); and three of the four cases in
Samarina et al. (2014). The lag-wage term for the low-unemployment countries is negative and consistent
with the literature. R&D expenditure is positive but insignificant for all country types. To ensure that the
treated units and control units are comparable, the estimated propensity scores are sorted and the control
units with estimated propensity scores which are less than the lowest score of the treated units are
discarded.
The results for the range of matching methods considered for the baseline model are illustrated in Table
(6). The first column reports the nearest neighbor matching results. The next three columns contain the
radius matching results with radian of r = 0.01, 0.02, and 0.03. The final two columns contain the results of
the kernel and stratification matching. Table (6) presents the results of the propensity score matching for
both the high and low unemployment countries for both high and low capitalization countries. The
evidence regarding the effectiveness of entrepreneurship targeting in these cases is a little less strong for
the low unemployment countries than when only the high unemployment countries are included. The GDP
growth rates are relatively strong and significant. The majority of the matching methods indicate that this
additional increment to the growth rates for the entrepreneurship targeting countries is significant. In turn,
the estimated treatment effects on the R&D spending and wages are found to be significant for all
matching methods and are related to the adoption of entrepreneurship targeting. In terms of population
there are no significant effects no matter the matching method.
The second panel of Table 6 presents the results of excluding the low unemployment countries from the
propensity score matching for the low capitalization countries. The results of the

Table 6:

Estimates of the average treatment effect of entrepreneurship targeting on economic variables in the

baseline model

Nearest Radius Matching Kernel Stratification

Neighbor Matching Matching

Matching r = 0.01 r = 0.02 r =0.03

High Market Capitalization

Countries

Entrepreneurship 2.016 *** 0.871 * 0.799 * 1.229** 1.362*** 1.191 ***
Tax (2.901) (1.724) (1.95) (2.412) (2.742) (2.678)
GDP -0.812 -0.723** -0.968*** -0.677*** -0.184** -0.824***
R&D (-1.873) (-0.142) (-0.328) (-0.048) (-0.042) (-0.039)
Wage 2.817* 2.996 2.367* 2.322 2.68 2.552
(1.857) (1.437) (1.675) (1.585) (2.319) (2.739)
1.684** 1.196* 0.851* 0.912* 1.36* 1.239**
(2.253) (1.769) (1.674) (1.645) (2.07) (2.193)
-2.818 -4.709** -4.916*** -4.636*** -4.13** -4.906***
(-1.178) (-2.042) (-2.692) (-2.686) (-2.323) (-2.775)

31

Population 1.437** 2.328 1.625 4.292 3.339 3.689
(0.188) (0.218) (0.42) (0.292) (1.154) (1.096)

Low Market capitalization countries

Entrepreneurship -0.603 -0.691 -1.070 -1.198* -0.856* -0.996*
Tax
GDP (-0.677) (-0.894) (-1.471) (-1.775) (-1.375) (-1.658)
R&D -1.074 -0.287* -0.472* -0.504** -0.184*** -0.247***
Wage (-1.045) (-0.121) (-0.284) (-0.119) (-0.005) (-0.019)
Population 2.249** 1.052 1.215 1.226* 1.334* 1.019
(2.378) (1.283) (1.561) (1.759) (1.782) (1.474)
2.447* 4.014** 2.376** 2.363** 1.685* 1.495*
(2.198) (2.879) (2.051) (2.04) (1.657) (1.702)
-7.425*** -4.801** -4.771*** -5.106*** -5.802*** -4.921***
(-2.757) (-2.548) (-2.969) (-3.154) (-3.094) (-2.927)
0.327 1.229 1.638 6.021 7.357 7.484*
(0.058) (0.292) (0.417) (0.97) (1.609) (1.953)

Note: Bootstrapped t-statistics are reported below the ATT coefficients *, **, and *** indicate significance at the 10%, 5%,
and 1% level respectively.

baseline model in Table 5 effectively still hold. Entrepreneurship outcome for entrepreneurship targeting
countries are lower, and in conjunction with a statistically significant lower GDP, entrepreneurship
targeting does not appear to work for low capitalization countries.

6. Concluding Remarks
We are interested in the dynamic inter-relationship between entrepreneurship, growth and unemployment,
given the increased importance of self employment in OECD countries over the past 25 years (Audretsch
& Thurik, 2001). For this purpose we use data for 30 OECD countries for a period from 1970 to 2011,
obtained from the COMPENDIA dataset, the OECD and the IMF. The descriptive statistics outlined in
section 3 of the paper give us a first taste of the feedback mechanism between the three key variables.
Once we take averaged values for each year we observe a clear positive pattern from past entrepreneurship
(as measured by the ratio of business owners in the labor force) to economic activity (as measured by GDP
per capita). Furthermore, past unemployment seems to spur entrepreneurship, giving vigor to the notion of
refuge entrepreneurship and also, not surprisingly GDP growth is found to reduce future unemployment.
Moving on to the parametric analysis, we use a panel VAR(1) model in the lines of Plehn-Dujowich
(2009) and Holtz-Eakin & Kao (2003). To overcome the endogeneity issues we use the IV estimator
proposed by Anderson & Hsiao (1981) and the GMM estimator introduced by Arrellano & Bond (1991),
commonly referred to as Difference GMM. Furthermore, we use the System GMM estimator following
Arrelano & Bover (1995) and Blundell & Bond (1998). This first set of results is presented at Table 1 and
Table 2 of section 5. All variables show a strong autoregressive component and the most robust
relationship is the positive one of past entrepreneurship on GDP, with a positive and significant coefficient
in five out of six specifications. In four out of six cases the feedback effect from GDP to entrepreneurship
is statistically significant, while past entrepreneurship significantly reduces unemployment in half of the
specifications. Finally, as expected GDP significantly lowers the unemployment rate in all but one
specifications.
Table 3 reports results with separate AR(1) and AR(2) models for each of the three aforementioned
variables. The second autoregressive lag proves insignificant in all three cases but the first lag is still
significant. Dummy variables for common language between the entrepreneur and the host country and
participation in a currency union are included, nevertheless do not exhibit significance. We also include to
categorical variables to capture the degree of market capitalization and equity as financing source of
enterprises. Both of them significantly increase business ownership and GDP per capita. A higher degree
of market capitalization is also connected with an increase in unemployment. The second lag is dropped

32

for the specifications reported in Table 4 and the control variables are augmented by including
macroeconomic variables. What stands out is the positive effect of population n unemployment and the
increase in all variables caused by R&D spending.
Finally, we use the Propensity Score Matching method (Rosenbaum & Rubin, 1983) to overcome the self
selection bias in determining a country's policy decision towards entrepreneurship targeting. The Average
Treatment Effects reported in Table 6 show that countries adopting entrepreneurship targeting as a growth
policy exhibit significantly higher economic growth rates and lower unemployment

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35



FOOD SECURITY IN TRANSITION ECONOMIES: THE CASE OF UZBEKISTAN

SAMARIDDIN BERDIEV, University Las Palmas Gran Canaria

The objective of this paper is to investigate food security in a transition economy looking at the
specific case of Uzbekistan. The question is to what extent the evolution from a planned central economy
towards a liberal market economy increases or decreases food security. This is investigated by analyzing
the data on food consumption and food production since the year of independence. The results find that
food security has decreased in Uzbekistan following independence, and that policy measures have been
ineffective in counteracting this effect.

The earth, taking place as a result of natural disasters, climate change, increasing urbanization
process due to the shrinking of agricultural crop areas, the shortage of water for irrigation, food production
more difficult situations such as drought. As a result, world food prices continue to rise in the markets.
Also, since 2008, the ongoing global financial and economic crisis, which caused deterioration of the
problem. For this reason, the whole world is given great importance to the issues of food security.

Ensure the safety of food independence is the key to the socio-economic and political stability in the
country. Since the early years of independence, food security, social and economic policy is one of the
central issues. As a result, the country has made great strides in this direction. Grain self-sufficiency, per
capita basic food products - meat, milk, eggs and fruit and vegetable production has grown significantly
and as a result, all the country's major food production at full force. According to the natural and climatic
conditions, with the exception of the products can not be produced in the country. Institutional reforms:
creation of inefficient liquidation of the company's farm and farms, agricultural production, storage,
processing and sale of agricultural land fund to support the development of the private sector in order to
support and improve the quality of reclamation fund to be established and important role in this process,
etc. played. As a result, agricultural production has increased more than 2 times. This is an increase of
about 10million people, or more than 30 percent of the country's population, the per capita consumption of
meat 1.3 times, milk and dairy products by 1.6 times, potatoes by 1.7 times and 2 times more than
vegetables and fruits to increase about 4 times. the country every year, 16 million tons of fruit and
vegetables are grown. Per capita of about 300 kilograms of vegetables, 75 kg of potatoes and 44 pounds of
grapes. This is optimal, that is three times higher than the norm deemed acceptable. Now, well-being and
to improve the quality of life of the population, the population with food, with the full problem of food
security issues are closely linked. Therefore, the implementation of food to ensure food security based on
theoretical grounds and priorities of the need for a scientific study of the theoretical and practical aspects
of this research has determined that the urgency of the topic.

Food security of the country's population with basic food products without sufficient internal
resources, software, represents the achievement of a minimum level of dependence on imports. The
agricultural sector of each country the main purpose of the reform is intended to achieve self-sufficiency in
food supply, and this is of great socio-economic importance. The need to ensure self-sufficiency in food
production to maintain independence, economic security and social stability in the country is one of the
conditions.

The urgency of this problem, our former totalitarian regime fragile, weak, one-sided developed,
mainly focused on the production of raw materials and intermediate products; the economy has become the
inheritance with him. 95 percent of the cotton processing has been taken out of the republic. During the
Soviet period, 50 light industry, the share of the total production volume of the network by 54% to 37%,
while the share of the food industry fell from 30 percent to 14 percent.

As a result, vegetables, fruit orchards, vineyards, forage crops area reduced, the main types of flour,
potatoes, sugar, animal products and other food products had been transported from other regions. The
threshold of independence, in 1990, 82 percent of the grain for consumption, 50 percent of meat and meat
products, dairy products, about 60 percent, and 50 percent of the potatoes, sugar, powdered milk and baby
food imported 100 percent. Flour and flour products to the country's average annual import of almost 500
thousand tons, potatoes - 450 thousand tons, 300 thousand tons of sugar, meat and meat products - 6.5
thousand tons of milk and dairy products was 3.7 thousand tons. However, the volume of food products

37

imported into the country was not enough to meet the needs of the population. They would be in the range
of medical standards.

After Uzbekistan gained its independence, to ensure food safety measures will be carried out in two
directions:
- Allocation of new plots and expand the rural population;
- Revision of the structure of agricultural crops.

The state policy on food, potatoes, fruits and vegetables also provides for self-supply. Adequate
supply of vegetable oil and animal products to the public, processing and storage of agricultural products,
as well as to create the necessary framework for the formation of the main types of food products sufficient
reserves to ensure the sustainability of their retail price, and to reduce the volume of imported products as
well as ensuring food safety is an important area.

It showed a drop in the level of the financial status of families in 54 countries around the world, the
hunger, the main part of the state's population may tell more than 20 shorten the average life expectancy of
the population in the country for the last 12 years, more than 840 million of the world's population suffers
from hunger evidence of this all over the world for this reason food great importance to the issues of food
security.

The whole world is given great importance to the issues of food security. Issues of food security,
the World Food Summit held in Rome in 1996 were discussed at the forum. This forum was attended by
130 countries. The least developed countries discussed issues related to food aid. At the forum, the center
of attention, you need to feed the population of the globe? That is the question. According to the
information because poor the world so much, they do not have enough food to eat daily, suffering from
hunger. Often illiterate, more than four children, the unemployed, low-wage, part-time employees is poor
or disabled people. Every 7 minutes a child in the world dies of hunger or related causes. Fill one-third of
all children under five suffer from malnutrition. Each year, more than 6 million children under the age of 5
die because of malnutrition around the world. 1.3 billion people a day at the expense of less than US $ 1 a
day. The majority of poor people live in South Asia. 522 million of them live on less than $ 1 a day. Sub-
Saharan Africa, almost half the population of the entire region in the south - 46.3 percent - live in poverty.
Access to basic services, and only 80 billion dollars is needed to reduce poverty. This is less than 0.5 per
cent of world income. The sum of the world's three richest oligarchs - much higher than the country's total
gross domestic product of the 48 poorest. So part of the UN Millennium Summit in 2000, leaders of 189
countries adopted the Millennium Development Goals is to eradicate extreme poverty and hunger as the
first set. According to him, on an income of less than $ 1 a day by 2015 the population who suffer from
hunger and the proportion of the population is two times two important functions, such as the reduction of
their contributions. The first set as a goal the reduction of poverty and poor nutrition. According to this
country by 2015, two-fold reduction of poverty. This is to ensure food security in Uzbekistan, including
the world is indicative of how important.

Food security of the country's population with basic food products represents the ability to provide
independent self. As well as a way to get rid of the food is very dependent on imports. It should be noted
that food security is to ensure domestic food products with a full measure of self-limited. To do this, the
import of food is also taken into account.

Including food security, physical and economic availability of food and nutrition security (table-1).

Table-1. Components of food security.

With the physical supply of Food security and economic food safety
food
Effective activity of the Sustainable level of income To control the quality of
agriculture and processing
industry support products and raw materials
The development of food
products and raw materials Ensuring economic stability in The development and
markets the country certification of quality
Development of trade management systems
The level of price regulation To improve the health of
the population

38

The creation of new jobs Plots of land to create the The formation of a healthy
conditions for security lifestyle
To support the employment of The growth of payments to the
the population budget

This can be seen in the table, with the physical availability of food products, food represents the
amount of the increase in production volumes. Food economic welfare of the population with incomes
increase, the level of inflation to maintain an acceptable level of food products through the acquisition
represents the ability to grow. Represents a safe eating healthy diet component improve the quality of the
population.

It should be noted, every man for food security through innovation to reduce waste, and increase
the quality of the food and nutrition, people avoid eating too much excess. Food macro and micro elements
include adequate intake and energy balance.

The variety of food and nutrition characteristics of the population, religion, customs and traditions,
as well as advertising and psychological effect.

To ensure food security in developing countries, food production and self-sufficiency rate is. This
ratio is created and consumed in the country is the expression as a percentage of the value of agricultural
products. This coefficient for each agricultural product prices is subject to change settlement. All
calculations carried out in constant prices. These prices will be determined based on the calculation of
wholesale prices.

The world's food self-sufficiency factor in the decline is affected by the following factors:
- An increase in demand for food products;
Population growth;
- The growth of per capita consumption;
- The need for a variety of products asymmetry. As a result, the level of productivity, there will be some
reduction in the volume of product types;
- A part of the land due to the acceleration of the process of urbanization, industrial facilities, residential
buildings, construction of roads will be busy. As a result of this shrinking of arable land used for
agriculture. Therefore, the volume of agricultural production stagnant growth rates high enough;
- The use of land areas converted to the decline factor;
- Lack of labor force;
- Entered the country on imported food products at low prices;
- A decrease in the growth rate of production of certain agricultural products;
- Fertilizer, agricultural chemicals and substances used too much and adequate irrigation and drainage
work, timely completion, quality of agricultural land due to the absence of sufficient attention to the rules
of the deterioration of land fertility.
Norms of human consumption of food products, food products to determine the chemical composition and
the norms of human security must be unfavorably substances which may be the right choice if they knew
the full inelastic demand. Products structural protein, carbohydrates, fat, food acids, vitamins, enzymes,
and a group consisting of mineral materials. Feed consumer demand for the products of the human person,
regardless of gender, age, and may vary depending on the types of work activities. Middle-aged man, 800
grams of food and 2 liters of water a day should be consumed. Heavy labor involved with the students of
4500 kcal to 3300 kcal, labor activity among the people who need 2800-4000 kcal food consumption
demand.
Therefore, to ensure the safety of the food will need to do the following:
- Use of land and water resources in agriculture, to ensure the effective use of legislation aimed at
strengthening the implementation of appropriate measures;
- Agricultural products with a high level of food products;
- Support the production of agricultural products by the state, political, legal, social and economic
measures to stimulate the development and implementation of a set of measures;
- Agricultural production, storage, processing, strengthening the material-technical base of the widespread
use of modern technologies;
- Improve the quality of the seed and breeding;

39

- Improve the supply of scientific information;
- To increase the human resource capacity;
- The establishment of production management to refine and perfect the mechanism on a regular basis, the
use of advanced farming methods;
- Food products in domestic and foreign markets to ensure the supply and demand balance, etc.

To ensure food security in Uzbekistan's independence is the key to the socio-economic and political
stability in the country. After the collapse of the former Soviet Union at that time, in 1989, according to
statistical research and consumer market with all the necessary products for nearly 95 percent of the
population and the territory of the former Soviet Union, which cuts through the daily basic food products
to the population cards led to the introduction of the system of sale was. In 1989, the national statistical
authorities in the middle of the country's population by the official 89.3 percent of those interviewed said
they do not eat enough meat products. These indicators of dairy products 56.5 percent, from 55.3 percent
in the sugar confectionery products 49.5 percent, while 17.5 percent of potatoes.

These numbers are on the verge of independence, there is a threat to food security in the country
must be able to ensure the country's food security. For this reason, after independence to ensure food
security has become a matter of life and death.

In order to improve the supply of food products to the population of the country in the
establishment of new orchards and vineyards, extensive work has been carried out. During the years 2010
and 2014, about 50 thousand hectares of new parks, more than 14 thousand hectares, including 23 hectares
of intensive orchards, vineyards were created. For the establishment of intensive orchards, Poland, Serbia
and other countries brought more than 6 million seedlings. In 2011, the garden created at the 2014 average
of 300 centers per hectare was harvested.

Structural changes in the livestock sector. The number of cattle in 1995 to 5.2 million. In 2005, 6.5
million of them have been. the other at the beginning of 2014 10607,3ming animals. The number of sheep
and goats in 1995 totaled 9.3 million head. In 2005, 11.3 million of them. the other at the beginning of
2014 amounted to 17717.6 thousand (table-2).

Table- 2.The dynamics of the increase in the number of livestock and poultry in the Republic of

Uzbekistan (beginning of the year, in thousands)

Livestock species 2005 y 2014 y % In 2014

compared to 2005

Cattle 6571 10607,3 161,4

Including cows 2821,3 4020,6 142,5

Sheep and goats 11351,9 17717,6 156,1

Bird 20540,4 47485,8 231,2

61.4% of the number of cattle, including cows by 42.5%, while the number of birds has increased
by 2.3 times. Cattle hoofed animal products as a result of increased production volume has been growing
year by year, and the years 1991-2013 of meat (live weight) increased by 225.7%. Milk production in the
same period increased by 236.7% (table-3).

Table-3.The main indicators of livestock production (thousand tons)

Production 1991 y 1996 y 2000y 2010y 2013y % In 2013
line
compared
Meat (live
weight) to 1991
Milk
Eggs 792 800,6 841 1461,4 1787,8 225,7
(million.)
3331 3404 3636,2 6169,0 7885,5 236,7
2347 1057 1252,9 3058,8 4388,1 186,9

Agriculture and large-scale changes and updates about the quality of the President of the Republic
of Uzbekistan "land and agricultural crops zoning to optimize our comprehensive and well-thought-out

40

policy is carried out on the most important raw materials and export volume of cotton production, which is
relatively stable production of other agricultural products, while maintaining a few times to increase. Most
importantly, led to the foundation of our food products to ensure the full, if necessary, allow them to export
to foreign countries. In particular, grain production increased 2-fold compared to 2000, potatoes - by 3.1
times, vegetables - 3.2 times, the grape - 2 times, meat and milk - by 2.1 times, eggs - 3.4 times. "

Increase food production and processing of agricultural products, has the following shortcomings
and problems in the implementation of investment projects aimed at:

1. The problems associated with the financing of investment projects. They include delays in the life
of the loan term and conversion of funds, high interest rates on credit, the initiator of the project is its lack
of funds, credit, insurance, mortgage, there are problems such as the lack of warranty.

2. Strengthening the material-technical base of the projects and the problems associated with the
supply of energy resources. They are the organizers of the project of land allocation, building construction
and technological problems and difficulties in the supply of equipment, electricity, gas and water supply
disruptions occur.

3. Projects for staff training,
special training and re-training experts in the legal, technical and economic problems related to the lack of
knowledge.

4. The initiators of the project problems and difficulties in providing news and information.
5. Agricultural products processing enterprises and the processing capacity utilization rate remains
low. For example, 55% of the energy production of vegetable oil, processing of meat and meat products by
30.5%, milk and dairy products, 17% of the energy used in processing. In addition, the fat-and-oil industry
is a lack of raw materials.
To solve these problems to ensure the country's population with sufficient quantities of food
products, increasing the level of processing of agricultural products will ultimately ensure sustainable food
security.
-Effective way of ensuring food security in Uzbekistan is one of the important directions of further
development of the food industry, on the basis of modernization, technical and technological re-equipment
of processing of agricultural products, increase production and quality of food products is achieved. For
this purpose, the country for the years 2012-2015 the production of food products, meat, milk, fruits,
vegetables and grapes, as well as the construction of processing plants for the modernization and
reconstruction of the existing targeted programs are being implemented. 90 According to the program for
meat processing project based on the construction of 47 new enterprises, reconstruction and modernization
of the existing 43 enterprises (table-4).

Table-4. 2012-2015 years, new enterprises for processing of agricultural products, construction,

reconstruction and modernization of the existing indicators

Type of product The total number of So, new construction Reconstruction and

projects modernization

Meat processing 90 47 43

Milk processing 118 44 74

For processing of 104 78 26

fruits, vegetables and

grapes,

As part of this program 118 projects for the processing of milk on the basis of 44 new construction,
reconstruction and modernization of 74 total. Processing of fruits, vegetables and grapes, 104 projects on
the basis of 78 new companies on the construction, reconstruction and modernization of 26 works are
carried out. As a result, in 2015 compared to 2011 production of canned fruits and vegetables ready to
132,8%, fruit juices and 141.9%, tomato pastes 116.7%. Sausages and canned meat products increased by
132.0% to 2 times, milk and milk products are 142%, butter by 154.6% and 107.6%, vegetable oil,
confectionery products increased by 137.5%. As well as being exported 132,8% fruit juice, canned fruits
and vegetables, 129.4% and 172.1%, tomato paste, dried fruits, the volume increases by 117%.

41

Food industry carried out 391 investment projects. January 23, 2015, the Senate and the Legislative
Chamber of the Oliy Majlis of the Republic of Uzbekistan held a joint meeting of the Cabinet of Ministers
of the Republic of Uzbekistan provided the near-term and long-term action programs According to the
food industry of Uzbekistan is planned to implement 391 investment projects. According to the program,
increasing the efficiency of agricultural production as the foundation and guarantee of the Government
pays special attention to improving the productivity of irrigated lands. Measures to improve the
reclamation of irrigated lands for the years 2013-2017 continued the implementation of the program. The
application of modern irrigation facilities construction and reconstruction, as well as more complex,
involves the installation of energy-saving equipment. The aim - 5 years, 1 million 400 thousand hectares of
irrigated land reclamation is to ensure and increase the productivity of agricultural crops. The introduction
of water-saving technologies, including orchards and vineyards continue to expand drip irrigation systems
is one of the most important tasks. This allows you to save up to 1 billion cubic meters of water each year.
Increase the processing of agricultural products - is another important task. For this purpose, the food
industry, the implementation of 391 investment projects, at least 1 million 300 thousand tons of fruits and
vegetables with a storage capacity of more than 2 thousand construction of modern cold storage facilities is
expected to reach 2 million tons of the total volume. At the same time the link between the logistics system
will be developed.

Conclusion
National security of citizens, society and the vital interests of the state, as well as a wide range of
national values and lifestyles, represents the vulnerability of the various external and internal threats.
National security of citizens, the person, is aimed at protecting the interests of society and the state. The
national security of the country’s national interests in various political, military, economic, environmental,
ideological, information and other factors, and is aimed at protecting threatened. Therefore, the complex
structure of the composition of the national security, political, military and defense, ideological, economic,
environmental, and includes information security.
An important component of national security, it is the most important indicator of the condition or
factor in ensuring economic security. "Economic security" was the most common way the country's
material and represents the economic potential of the non-renewable and renewable. Food security of the
country's population with basic food products represents the ability to provide independent self. As well as
a way to get rid of the food is very dependent on imports. It should be noted that food security is to ensure
domestic food products with a full measure of self-limited. To do this, the import of food is also taken into
account.
Policies to ensure food security of the country, mainly in its agricultural production and the
development of domestic markets, partly on the basis of overseas imports of food products to meet the
minimum level of food needs of the population will be provided. Increasing food production in the
Republic of Uzbekistan carried out agrarian reforms and structural changes in agriculture, reduced acreage
of cotton, vegetables, potatoes, vegetables, melons, expansion of cultivated land and orchards and
vineyards, livestock development, agricultural products in food industry the growth in the production and
processing of food products is important.
Increase food production and processing of agricultural products, has the following shortcomings
and problems in the implementation of investment projects aimed at:
- The problems associated with the financing of investment projects. They include delays in the life
of the loan term and conversion of funds, high interest rates on credit, the initiator of the project is its lack
of funds, credit, insurance, mortgage, there are problems such as the lack of warranty;
- Strengthening the material-technical base of the projects and the problems associated with the
supply of energy resources. They are the organizers of the project of land allocation, building construction
and technological problems and difficulties in the supply of equipment, electricity, gas and water supply
disruptions occur;
- Projects for staff training,
special training and re-training experts in the legal, technical and economic problems related to the lack of
knowledge;
- Initiators of the project, problems and difficulties in providing news and information;

42

- Processing enterprises and the processing of agricultural products, capacity utilization rate
remains low;

Rural areas of uncultivated agricultural crop growth in year-over-year decline in soil salinity,
salinization, land reclamation situation deteriorated serious problems in terms of the volume of food
production and food security.

Reliable way to ensure sustainable food security in the Republic of Uzbekistan in order to improve
ameliorative condition of irrigated lands for agriculture will need to do the following:

irrigate agricultural crops efficient use of water resources through the application of advanced
technologies;

irrigated agricultural land from the permanent monitoring the status of an aimless and irrational use
of harsh measures against aging and as a result of bad land use appropriate measures in relation to that
goal.

In order to increase food production for the country's agricultural structural change is necessary to
carry out the following:

- Livestock, grain, potato fields such as advanced countries should be a learning experience and
apply it;
- Varieties of agricultural crops, taking into account natural and climatic conditions of the regions and
districts, focus on improving product quality and productivity of crops;

- Pests and disease resistant, early maturing and high-yielding agricultural crops;
- The effective use of mineral fertilizers, pests and expand the use of biological means.

REFERENCES
1. Islam Karimov, (2011) The threshold of independence. - T.
2. Islam Karimov, (2014) "Food Program of reserves," keynote speech at the opening ceremony of the
international conference.
3. Islam Karimov,(2014) The development of high growth rates in 2014, the mobilization of all available,
and will consistently continue our proven strategy of reforms: in 2013 the country's socio-economic
development of the most important priorities of economic program for 2014 and the findings of the
meeting of the Cabinet of Ministers. – T.
4. Islam Karimov, (2015) In 2015, the implementation of major structural changes in the economy, due to
the continuation of the process of modernization and diversification opportunities for private ownership
and entrepreneurship - the priority task: in 2014 the country's socio-economic development and economic
program for 2015, the most important priorities Ministers .// publication of the report on the meeting of the
Cabinet.
5. Abulkosimov H.P.(2006) Economic security. - T: The Academy.
6. Abulkasimov X.P. (2012)Economic security of the state. Study Guide. T .: Academy.
7. Abulkosimov H.P. Rasulov T.S. (2015) Ensure the safety of food. Brochures.

43



THE ENTREPRENEURIAL COMPETENCIES OF SMALL AND MEDIUM ENTERPRISE

MANAGERS IN THE KINGDOM OF BAHRAIN

VENUS D. BUNAGAN, Arab Open University-Bahrain

ABSTRACT
This research entitled the Entrepreneurial Competencies of Small and Medium Enterprises in the Kingdom
of Bahrain determined the following competencies of the managers such as: leadership skills, educational
skills, interpersona skills, professional and managerial skills.
The study further determined the relationship between the respondents characteristics and their perceived
competencies which were done by the owner-managers themselves and selected staff.

Findings and Conclusions
1. The owner / managers of the small businesses in the Kingdom of Bahrain are relatively young; there are
9 males and 1 female owners / managers. Some finished their BS degrees and some finished the secondary
education. In table 6, 6 pr 60% of the owners / managers are in business for 10 years and more. Two (2) or
20% have been in business for 7-9 years and only one (1) or 10% of the respondents are in business from
4-6 years and 3 years below.

This means that the owner / managers are really entrepreneurial and are competent in their business
undertakings.
2. The owners / manager are perceived to possess the different competencies like the leadership skills,
educational skills, interpersonal skills, professional skills and the managerial skills.
3. The subjects / respondents vary in their perceptions of the competencies of the owner / manager.
4. The data shows that the male owner / managers exhibit better managerial and leadership skills than their
female counterpart. The data likewise suggest that the relatively older owner / managers, exhibit better
educational skills that the younger ones.

I. Introduction
Management experts have spent a great deal of time and effort providing guidance to supervisors

concerning the best methods for setting and communicating expectations. However, comparatively little
has been developed for supervisors dealing with appropriate and effective ways to monitor efforts toward
achievement of these objectives.

One of the most difficult parts of managing is the appraising and judging of employees’
performance both from top echelon which is composed of the heads, the middle level management and
supervisors. While a number of tools for the evaluation of these groups of people have been formulated,
still great deal of suggestions is needed for the improvement of such.

The Kingdom of Bahrain has always been characterized by a vibrant partnership between the
government and the private business sector in the task of enforcing the state’s constitutional mandate to
provide smooth flow of businesses to all Bahrainis and other nationalities.

With the private business sectors still accounting dominantly doing business, ability of the country
to produce manpower with the world class skills required to compete in the global market will be
dependent, to a large extent, upon the ability of private businesses to maintain the highest standards of
quality in the production of goods and services. (Kotler,1998).

Attached to the recruitment, selection and hiring of people by the small business enterprises is the
regular performance appraisal of the employees for standard performance and operations.

To achieve the goals and objectives of the organization means that administrators/managers should
possess important competencies. Having a leader who is a visionary, a collaborator, a salesperson and a
negotiator, or a manager, who is a manager, who is a captain, an analyst, a conductor, and a controller, is
considered to be indispensable.

Business managers and owners should possess the following key roles in their operations: 1) to
ensure the task is performed as required, 2) to provide supervision with accurate data for organizational
performance appraisal, 3) to motivate employees to work at peak performance even when the supervisor is
not present and 4) to motivate workers to display appropriate behavior (PACSB Newsletter, 2002).

45

The process of overseeing work not only increases the likelihood that the task will be performed as
expected but it also provides the opportunity for supervision to offer feedback to subordinates on the
quality of the work effort. Thus, the need to have fully qualified people for the task equipped with the
following skills: a) leadership skills, b) educational skills, c) interpersonal skills, d) professional skills and
the e) managerial skills.

This study aimed at determining further business owners as managers being in the fore in leading
their respective subordinates and staff. Other than the usual competencies which are categorized in the
evaluation tools for the business owners and managers this study aimed at determining further the
following skills: a) leadership skills, b) educational skills, c) interpersonal skills, d) professional skills, and
e) managerial skills which eventually should be considered in the general evaluation of performance of
business owners and managers of small enterprises in the Kingdom of Bahrain.

1.1 Statement of the Problem
This study aimed to determine the competencies of the small business owners and managers of

selected enterprises in the Kingdom of Bahrain.
Specifically, the study sought to answer to the following questions:

1. What are the characteristics of the respondents in terms of:
a. Age
b. Gender
c. Educational attainment
d. Length of Stay in the Business
e. Trainings Related to Business

2. What are the competencies of the respondents in terms of:
a. Leadership skills
b. Educational skills
c. Interpersonal skills
d. Professional skills
e. Managerial skills

3. Is there significant relationship between the characteristics of the respondents and their
competencies?

4. Is there significant difference in the perceptions of the two groups of respondents as regards the
competencies of the business owners / managers?

1.2 Hypotheses
1. There is no significant relationship between the characteristics and competencies of the business

owners and managers as perceived by the two groups of respondents.
2. There is no significant difference in the perceptions of the two groups of respondents as to the

competencies of the business owners and managers.

1.3 Scope and Delimitation of the Study
The focus of the study is the competencies of the business owners and managers in the Kingdom of

Bahrain
The variables of the study included the demographic profile of the respondents like the age, gender,

highest educational attainment, field of specialization and trainings attended in the different levels.
The other variables are the competencies like the leadership skills, educational skills, interpersonal

skills, professional skills, and managerial skills.
The demographic profile and the skills were tested as to their relationship. Likewise, the

relationship between the characteristics of the respondents and their administrative competencies and the
differences on the perceptions of the two groups of respondents as regards competencies of the business
owners and managers was also tested.

1.4 Significance of the Study
The results and findings of this study will be beneficial to the following:

46

Top Management. The results and findings of the study could serve as supplements to the
performance appraisal to which the business already use. Meaning, the management could possibly input
some improvements in the existing tool for the efficiency rating of the subjects similarly, management
could also become more consistent and stricter in the choice of the people to be designated in such
positions so that better quality of management of people and resources is achieved in the business.

Owners and managers of the business. The findings will be a source of enlightenment as regards
other managerial competencies and skills they have to be well-equipped with in order to become fully
capable and effective in the performance of their duties and functions.

Staff of the business. The staff/workers as direct staff of the owners and mangers will be properly
monitored and supervised as to their managerial efficiency and other related tasks because the owners and
managers will already be equipped of the necessary skills.

Customers. As the end-beneficiaries of the study conducted, the customers will be better delivered
of the expected quality of goods and services. They, being the direct consumers of the business who are
efficiently supervised by the owners and managers. This would create a chain reaction of benefits.

2. Review of Related Literature
Management and leadership are often thought of as the same thing. The managerial function

leading is defined as the process of influencing people so they will contribute to organization and group
goals.

While working toward goals, a manager must take into account the dignity of the whole person
(Welrich and Koontz, 2003).

A leader sees beyond the immediacy of decisions, exercising the ability to often predict the effects
of actions, policy and even words. A leader keeps up with current industry research and best practices in
hopes of benefiting the enterprise with such knowledge.

The successful leader defies limitations. He works effectively not only with his immediate work
group but also those outside the formal line of authority in order to accomplish any of the enterprise’s
goals.

Every resilient, a leader will actively seek assignments, guidance and feedback that are necessary in
order to prepare him/her for handling current or future objectives (Levines, Teresa, September 2001).

On the other hand, manager, as sorted from Levines, (October, 2001) is considered as a Captain, an
Analyst, a Conductor, and a Controller.

In the book entitled Great Leader as for Great Government, Drucker (1998) mentions key
characteristics for great leaders, they are:

1. Understanding and appropriately applying procedures, regulations and policies related to
specialized expertise; understanding linkage between administrative competencies ad mission
needs, keeping current on issues, practices and procedures in technical areas.

2. Stressing results by formulating strategic program plan that assess policy/ program feasibility
and include realistic short and long-term goals and objectives.

3. Exercising good judgment in structuring and organizing work and setting priorities, balancing
the interests of clients and readily readjusting priorities to respond to customer demands.

4. Anticipating and identifying, diagnosing and consulting on potential or actual problem areas
relating to program implementation and goal achievement, selecting from alternative curses
corrective action, taking action from developed contingency plans.

5. Setting program standards, holding self and others accountable for achieving these standards,
acting decisively to modify standards to promote customer service and/or the quality of course
and policies.

6. Identifying opportunities to develop and market new products and services within or outside of
the organization; taking risk to pursue a recognized benefit or advantage.

2.1 Leadership Traits
Efforts to understand success focused on the leader’s personal characteristic of traits. Traits are the

distinguishing personal characteristics of a leader, such as intelligence, values and appearance.

47

Some of the characteristics of a leader include: 1) social background and mobility, 2) Intelligence
and ability judgment, decisiveness, knowledge, fluency of speech, 3) personality alertness, originality,
creativity, personal integrity , ethical conduct and self -confidence, 4) work related characteristics –
achievement drive, desire to excel, drive for responsibility, responsibility in pursuit of goals, task
orientation 5) social characteristic ability to enlist cooperation , cooperativeness, popularity, prestige,
sociality, interpersonal skills, social participation, tack and diplomacy (Garry, 2001). Recent work on
leadership has begun to distinguished leadership as something more: a quality that inspires and motivates
peoples beyond their normal level of performance.

2.2 Transactional leaders
The transactional leaders clarify the role and task requirements of subordinates, initiate structures,

provide appropriate rewards and try to be considerate to and meet the social needs of subordinate. The
transactional leaders’ ability to satisfy subordinates may improve productivity. They often stress the
impersonal aspects of performance, such as, plans, schedules and budget. They have a sense of
commitment to the organizational norms and values.

2.3 Charismatic leaders
These types of leaders go beyond the transactional leader’s techniques. They have the capacity to

motivate people to do more than usually expected. The impact of characteristics leader is normally from:
1) stating a lofty vision of an imagined future that employees identified with:

2) Shaping a corporate value system for which everyone stands; 3) trusting subordinates and
earning their complete trust in return.
Charismatic leaders raise subordinates, consciousness about new outcomes and motivate them to transcend
their own interest for the sake of organization or the department (draft, 1997)

2.4 Transformational leaders
These leaders are similar to charismatic leaders but are distinguished by their special ability to

bring about innovation and changes. They emerge to take an organization through major strategic change
such as: revitalization. They form intangible qualities, such as vision, shared values and provide common
ground to enlist their followers in the change (Richard 1997)

2.5 Interactive leaders
Interactive leaders are concerned with consensus building, inclusiveness, and participation and

caring. They promote idea that striving to reach organizational goals to en able employees to reach their
personal goals (Richard, 1997)
Some critics argue that the importance of leadership is greatly overrated and that in many contexts, leaders
make either little or no difference.

2.6 Managing employees
No one needs to be reminded of the growing diversity in the workforce today. The multi- cultural

force will continue to grow both on a domestic level and an international level. A diverse workforce not
only results from a global economy, but has itself become more multi- cultural reflecting the changing
general population demographics. The consequences’ for managers are great and varied. This diversity
reflects the need for managers to be more flexible.

2.7 Manager’s competencies
Competencies will help determine how successful a manager might be at managing others.

Professor Edgar Schein as cited By Gary (2001) says career planning is a continuing process of discovery
in which a person slowly develops a clearer occupational self-concept in terms of what his/her talents,
abilities, motives and values are. Schein also says that as one learns more about himself, he becomes
apparent that he has a dominant career anchor, a concern for value that he will not give up if a choice has
to be made (Gassler, 2001).

48

2.8 Related Studies
Being a business owner and manager is a broad function, which encompasses specific functions,

task areas and responsibilities. One of the responsibilities is the evaluation/appraisal of business processes
and products. Process refers to the procedures that the owner and manager and staff use in their business
operations, while products deal with the results or outcomes of these processes in terms of customer
satisfaction.

2.9 Roles and Competencies for Distance Education Programs in Higher Education
An expert panel of distance educators had identified and analyzed the roles and competencies

needed in higher and distance education programs.
The study had three purposes: The first was to identify the roles and competencies in distance

education in higher education. The second purpose was to rate the importance of those competencies. The
third goal was to compare the results to those of a previous competency study done five years ago.

The study identified thirteen roles needed to implement and manage distance education program in
higher education. Many roles are typically assumed by one position, depending upon the skills of the
person in that position. However all these roles should be considered in staffing and training decisions. The
importance of the roles and the competencies will vary depending on the institutional environment
particularly related to the distance education model be implemented. A set of thirty general competencies
emerged that are necessary to varying degrees across all roles. They include competencies related to
communication and interpersonal skills, administration and management, technology and instruction. The
level of mastery of a general competency will vary from role to role. Some of the general competencies are
primary to one role such as the change agent skill to the role of leader/change agent, for example, or
secondary or tertiary in the function of other roles. The following are the different competencies attached
to certain roles: teamwork skills, basic technology knowledge, interpersonal communication skills, English
proficiency, writing skills, questioning, adult learning theory, knowledge of support services, feedback
skills, organizational skills, technology access knowledge, planning skills, software skills, knowledge of
intellectual property, facilitation skills, public relations skills, multi-media knowledge, presentation skills,
consulting skills, evaluation skills, group process skills, editing skills, project management skills, change
agent skills, negotiation skills, needs assessment skills, personal organization skills (Thatch, E., 1997 ).

In a study by Balton, his conceptualization includes a number of key concepts as follows:
1. Evaluation is a cyclical process of planning collecting information and using information.
2. Evaluation includes the examination of input, process and outcomes.
3. Evaluation involves consideration of process and products of several people.
4. Evaluation is a subsystem interrelated with other subsystems within the total school organization
5. Evaluation involves self-evaluation plus the evaluation by the outsiders.
6. Evaluation includes the assessment of common objectives and processes plus objectives related to a

specific situation.
Moreover Balton (1993) views evaluation as a cyclical process, not an activity which occurs at a
given point in time when a judgment is made regarding the value of the person’s performance or the value
of some products. Neither does evaluation consist of multiple phases which are sequential cyclical and
repetitive.
On the other hand, Huplin 1990) conducted studies of leadership with the used of the two-
dimensional Leader behavior descriptive questionnaire. This instrument was constructed on the premise
that leader behavior can be explained in the continuum of both consideration and initiation of structure.
Based on a study Schein’s MIT graduates, as mentioned by Dassler 1998), he concluded that
managers have a stronger managerial competence career anchor. They show strong motivation to become
managers, and their career experience enables them to believe that they have the skills and values
necessary to rise to such general management positions. A management position of high responsibility is
their ultimate goal. When pressed to explain why they believed they had the skills required to gain such
positions, many said they saw themselves as competent in three areas: 1) Analytical competence, the
ability to identify, analyze and solve problems under conditions of incomplete information and uncertainty,
2) interpersonal competence, the ability to influence, supervise lead, manipulate and control people at all
levels and 3) emotional competence, the capacity to be stimulated by emotional and interpersonal crises

49

rather than exhausted or deliberated by them, and the capacity to bear high levels of responsibility without
becoming paralyzed (Dassler, 1998).

Another study conducted by Hitts in the Managerial Competencies, Leadership skills, and Work
Performance of Nurse Supervisors and the Implications to the Nursing Practice explored the relationships
among the managerial competencies, leadership skills and work performance in administrative and clinical
nursing of nurse supervisors at Hospital ng Maynila. The results of the study showed that the nurse
supervisors at Ospital ng Maynila demonstrated evidences of managerial competencies and leadership
skills. Furthermore, managerial competencies were found to be significantly useful in administrative
nursing, but not as much in clinical nursing. Specific conclusions given were: 1) Nurse Supervisors at
Ospital ng Maynila generally demonstrated managerial competencies and leadership skills, but these have
to be raised at a higher level to meet the demands of the hospital work, 2) Variations in the perceptions of
the three respondent groups were due to various factors, requiring further investigation, 3) Nurse
supervisors who exhibited passable managerial competencies were likely to become good leader and vice-
versa, 4) Nurse supervisors who demonstrated passable managerial competencies were also likely to
demonstrate acceptable work performance in the aspect of administrative nursing, but not necessarily in
clinical nursing and 5) The nurse supervisors who performed well in clinical nursing may not always have
high managerial competencies (Hitts, 2000).

The literature and studies gathered are related with the present study since these dealt with
managerial competencies, leadership skills which employees in varied organizations even in educational
institutions should possess as basis for their performance evaluation.

Likewise, sole related literature and studies provide theories in leadership and management which
are supplements to the discussion on competencies enumerated.

2.10 Theoretical Framework/Conceptual Framework
Efforts to understand success focused on the leader’s personal characteristics or traits. Traits are the

distinguishing personal characteristic of a leader, such as intelligence, values and appearance. In addition
to personality traits, physical, social and work – related characteristics have been studied.

Of these characteristics include: 1) social background and mobility, 2) intelligence and ability, 3)
personality, 4) work-related characteristics which now consists the administrative competencies like the
leadership skill, educational skill, professional skills and managerial skill, and 5) social characteristics like
interpersonal skills and social participation. (Dassler, 2001)

Managerial competencies help determine how successful managers might be at managing others.
Professor Edgar Schein’s study a cited by Dassler, 2001 says career planning is a continuing process of
discovery in which a person slowly develops a clearer occupational self-concept in term of what his or her
talents, abilities, motives and values are.

A study by Hits on the managerial competencies, leadership skills and work-related performance of
Nurse Supervisors and Implications to the Nursing Practice explored the relationship among the
managerial competencies, leadership skill and work performance in administrative and clinical nursing of
nurse supervisors at Ospital ng Maynila. The results show that the managerial competencies were found to
be significantly useful in administrative nursing, but not as much as clinical nursing. (Dassler, 2001)

Above concepts from literature and findings of certain studies were bases of the researcher in the
formulation of managerial competencies inherent or are acquired by the owners and managers in the
performance of their administrative and supervisory functions.

With the rapid pace of technological change, the way jobs are performed require all types of
workers to be resilient in adapting changes or improvements in their work environments. They should
possess skills in leadership, educational, interpersonal, professional and even managerial skills to
satisfactorily perform given functions especially with administrative and supervisory tasks.

Assessing the administrative skills of managers either in organizations offering goods or services
however, is issued for a variety of purposes, including compensation administration, assessing training
needs and to come up with a better, more reliable and more objective performance evaluation.

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