Theoretical and Empirical Literature on Entrepreneurial Activities and Economic Performance

.The aim of this paper is to provide a critical appraisal of the literature on the entrepreneurship-economic growth relationship and the underlying theories supporting the hypothesised relationship between the two. The entrepreneurship-economic growth literature widely accepts the work of Schumpeter (1934; 1942) and the process of ‘creative destruction’ as the crucial contribution in the field (Aghion and Festre, 2017). Schumpeter’s underlining argument was that increased entrepreneurial activities, generated by the process of ‘creative destruction’ lead to increased economic dynamism and growth (Wennekers and Thurik, 1999). The pioneering work of Wennekers and Thurik (1999) provided a conceptual framework linking entrepreneurship to economic growth and has also been regarded to have influenced the subsequent volume of entrepreneurship-economic growth literature. As Baumol (2010) points out, although the empirical studies have developed significantly, especially in the last two decades, the theory of entrepreneurship has not yet received the deserved place in the mainstream economic theory. The majority of empirical studies investigating the impact of entrepreneurship on economic growth, or economic performance, in general, find a positive and significant association between the two (see Stam et al., 2010). Some studies, however, find that there is a negative relationship between entrepreneurship and economic performance (see Blanchflower, 2000), while others suggest that there is no significant relationship between entrepreneurship and economic growth (see Dejardin, 2001)