Volume 44, Number 174,
July-September 2013
Manufacturing Entrepreneurship
and Development in the Mexican States
Martín Ramírez Urquidy, Manuel Bernal and Roberto Fuentes
ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT

Empirical studies on creating companies draw on evidence that can be divided into two major groups: those that focus on the individual features and personal motivations of the entrepreneur, and those that consider the macroeconomic environment. In the first group, entrepreneurship is analyzed from the perspective of choice models and these studies seek to explain the creation of companies or the transition from employee to business leader, the duration, success and closure of businesses, as well as the determination of the characteristics of entrepreneurs. The literature highlights the importance of pecuniary aspects such as the availability of financial capital, the income differential in the transition from job to business leader and difficulties in the labor market, such as low salaries or high and persistent unemployment (Parker, 2006). Non-pecuniary aspects, such as the role of individual features, including social and human capital, labor market experience and family history in business, are also important. Other non-pecuniary elements that have been analyzed include the gender of the entrepreneur, preference for flexible schedules and autonomy, immigration status and civil status, among other factors (Georgellis et al., 2005).

Literature on entrepreneurial development and its relationship to the macroeconomic environment has proposed two central hypotheses with respect to the creation of new companies. One of these theories is the recession-push, or the “refuge effect,” which explains the proliferation of companies in response to difficult economic and labor market circumstances (Georgellis et al., 2005). One work that follows this line of thinking was written by Evans and Leighton (1989), suggesting that the transition to small-scale entrepreneurship is more frequent among employees with low salaries, those that often change jobs, or people that have experienced frequent and lasting unemployment. Another work was written by Schuetze (2000), who wrote that unemployment and reduced salary mean a lower opportunity cost for starting a business, which increases the chance that someone will become an entrepreneur. Another theoretical perspective, known as the pull or Schumpeterian effect, argues that the development of new small companies is linked to growth dynamics and responds to a market opportunity to invest in the business sector. This would imply a positive relationship between the inherent capacities of an individual (business talent) and favorable economic conditions to create a new company (Stel, Thurik, Verheul and Baljeu, 2007). This perspective of the entrepreneurial spirit might predict that self-employment or other layers of micro-enterprises are proliferated counter-cyclically. As such, gdp growth would be followed by a reduction in business activity, while its contraction would be due to the entrance of new micro-enterprises, especially self-employment.

A variety of studies have tried to analyze the effect of economic and business dynamics, in terms of production and employment, on the creation of companies. Parker and Robinson (2004) produced research that sought to explain international variations in self-employment through the development of business initiatives in 12 oecd countries from 1972-1996. These authors concluded that business initiatives respond to a need to generate one’s own revenue, especially in periods of low economic activity. Other business initiatives respond to market opportunities that are more widely available in moments of economic growth, but may also exist in times of economic recession.

Acs et al. (2008) analyzed the business structures and entrepreneurial patterns associated with the three stages of economic development that govern competitiveness as proposed by Porter (2002). The stages are as follows: the first is driven by factors, the second by efficiency and the third by innovation. The first stage is characterized by a situation in which countries compete through low costs, especially labor-related costs. There is high self-employment in the production of low-added value products, as well as in manufacturing and service activities, and nations lack availability and capacity to take advantage of knowledge for innovation and export.

In order to move to a second stage driven by efficiency, nations must increase their productive efficiency by educating workers to adapt to the phase of technological development. This is also characterized by the relatively broader presence of companies that exploit economies of scale, high manufacturing participation and a reduction in the employment rate. It may be expected that entrepreneurial activities fall as countries develop, because an increase in social capital through private enterprise, foreign direct investment or state property mean that the proportion of salaried workers increases as compared to entrepreneurial activities. There is therefore an expectation of a negative relationship between entrepreneurial activity and economic development (Acs et al., 2008). The third stage, driven by innovation, is notable for an increase in entrepreneurial activity that is likely associated with higher sophistication, resulting from the availability of human capital and better usage of scientific knowledge for innovation. This stage is marked by a reduction in the participation of manufactures and a broadening of the business services sector, as well as advances in information technologies, telecommunications and methods of commercializing goods. According to Acs et al. (2008), the majority of developed countries are in the stage of economic development driven by innovation, with a tendency towards the proliferation of small enterprises in the final phase of economic activity. On the other hand, the majority of developing countries, especially emerging economies, are in the efficiency-based stage (Acs et al., 2008; Acs and Amorós, 2008). Entrepreneurial activity is the factor that defines whether a country is in one stage or another. Countries driven by efficiency have low entrepreneurial activities, where individuals are concentrated in salaried labor. Nations in the innovation stage have high entrepreneurial activity, which means that a portion of workers, especially those with high levels of human capital, can make better use of their knowledge through entrepreneurial activity (Audretsch, 2001).

The differences associated with the various stages of economic development can be simplified into two types of entrepreneurship, classified according to the motivation behind the activities as well as their level of sophistication: entrepreneurship due to need and entrepreneurship due to opportunity. The former case describes individuals with a low socioeconomic profile motivated by the need to find a sustainable living as a result of employment problems in a context of low or recessive economic development, and not necessarily because entrepreneurship will lead to greater income than what a salaried worker earns. The latter case encompasses more educated individuals with broader business and technical training, motivated by opportunities that they perceive in the market, which may represent higher income than if these people were to use their skills as salaried workers. According to Acs and Vargas (2005), entrepreneurship due to opportunity has a positive and important impact on economic development. At the same time, Acs and Amoros (2008) maintain that there is a negative relationship between entrepreneurship due to need and per capita income.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 193, April-June 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Moritz Cruz. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: June 27th, 2018.
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