Cross-National Differences in the Transition from Nascent Entrepreneurship to New Business Ownership

Nascent entrepreneurship and new business ownership are subsequent stages in the entrepreneurial process. In this paper we aim to illustrate how information from the largest internationally harmonized data base on entrepreneurship, the Global Entrepreneurship Monitor (GEM) project, can be used to approximate these first stages of the entrepreneurial process. More specifically, we make two contributions: First, our methodological contribution lies in computing the ratio of new business owner-managers to nascent entrepreneurs in a way that it reflects the transition ratio from nascent to new business ownership and in validating this ratio by benchmarking it against birth rates from longitudinal PSED-type studies. Second, we make a theoretical contribution by investigating the determinants of this transition ratio using GEM data on 54 countries from the years 2001 to 2007. We find three consistent influences: the availability of informal investments, the unemployment rate, and the level of development, measured in GDP/capita. We suggest future research and how policy makers can benefit from using the transition ratio to gain a better understanding - across a wide range of countries - of the factors that lead nascent entrepreneurs to make the next step and establish their business.