Absorptive Capacity as a Device for Entrepreneurship : A Primer on Firm-Level Entrepreneurship and Economic Performance

Audretsch and Thurik (2002) is one of the rare attempts to link entrepreneurship to economic performance. Whereas its theoretical background highlights the role played by small firms (henceforth SF) in the conduct of innovation, the empirical model it is based on does not. Rather, it compares SF contribution to economic growth to that of large firms without illustrating how innovation is instrumentalized for entrepreneurship. This is the purpose of our paper which arguments that absorption capacity as a device can help in such a project. For this, it mixes conceptions of entrepreneurship as innovation conduct with that of entrepreneurship as opportunity exploitation. It suggests to distinguish economic agents involved in entrepreneurship from opportunities sources being exploited. The paper elaborates on how to turn the process into variables, measure and introduce them into a model for regressions and tests at an aggregated level. Specifically, literature on SF and innovation helps to define entrepreneurial capacity which is for a country or industry its share of SF whereas the vast work on technological change is useful to quantify opportunities. Variables interact and entrepreneurship matters when ones obtain a significant coefficient suggesting absorption or exploitation. It happens for critical levels of SF presence which must be considered carefully for at least two reasons: (1) critical levels of firm size are specific to our dataset and moving from them for country or industry purposes need subsequent works. (2) Respective influences of entrepreneurship components are not of same intensities, that of opportunities being the most important, it incentives for interest in other agents involved in exploitation. Our dataset documents heighten manufacturing industries (ISIC Rev.3 with two digits) and countries such as France, USA, Great-Britain, Italy, Denmark, Finland and Germany.