Int. J. Business and Globalisation, Vol. 18, No.

1, 2017 73

Entrepreneurship, innovation and competitiveness:

what is the connection?

João J. Ferreira*
University of Beira Interior and NECE – Research Unit,
Estrada do Sineiro, Polo IV 6200-201 Covilha, Portugal
Email: jjmf@ubi.pt
*Corresponding author

Cristina I. Fernandes
Polytechnic Institute of Castelo Branco and NECE – Research Unit,
University of Beira Interior, Portugal
Email: kristina.fernandes81@gmail.com

Vanessa Ratten
Department of Management and Marketing,
La Trobe Business School,
La Trobe University,
Bundoora, Melbourne, 3086, Australia
Email: v.ratten@latrobe.edu.au

Abstract: Entrepreneurship has attracted growing interest about its role

in decision-making policies capable of fostering economic and social
development. There has also been an increased attention on how entrepreneurs
innovate and in so doing consequently contribute to higher levels of
international competitiveness. Following recourse to Global Entrepreneurship
Monitor (GEM) and the Global Competitive Index (GCI) data, the objective of
this study involves analysis of the interlinkages between three constructs:
entrepreneurship, innovation and competitiveness across the three phases of
development defined by the GEM. To this end, we analyse the influence of the
entrepreneur profile not only through both their intrinsic and extrinsic
knowledge but also through their innovation and competitiveness across the
three GEM development phases. The results convey how the importance
attributed to entrepreneurship is dependent on the stage of economic
development and consequently may reflect in either a positive or negative
impact on this same economic growth strategy.

Keywords: entrepreneurship; innovation; competitiveness.

Reference to this paper should be made as follows: Ferreira, J.J.,

Fernandes, C.I. and Ratten, V. (2017) ‘Entrepreneurship, innovation and
competitiveness: what is the connection?’, Int. J. Business and Globalisation,
Vol. 18, No. 1, pp.73–95.

Copyright © 2017 Inderscience Enterprises Ltd.

74 J.J. Ferreira et al.

Biographical notes: João J. Ferreira is an Associate Professor at University

of Beira Interior (UBI), Portugal. He completed the European Doctoral
Programme of Entrepreneurship and Small Business Management at the
Autonomous University of Barcelona (UAB), Spain. He is currently the
Scientific Coordinator of NECE – Research Unit of Business Sciences, UBI.
Since 2013, he has been a member of the A3Es agency evaluator group,
responsible for evaluating management, marketing and entrepreneurship
degrees in Portugal. He has published various articles in international journals
and is editor of some international books. His areas of interest are strategy,
competitiveness, and entrepreneurship.

Cristina I. Fernandes is an Assistant Professor at Castelo Branco Polytechnic

and researcher at NECE – Research Unit in Business Sciences, University of
Beira Interior (UBI). She has published papers in a several international
journals. Her research interests are: knowledge services, innovation and
entrepreneurship, and regional competitiveness.

Vanessa Ratten is an Associate Professor at La Trobe University, Australia.

She completed her PhD at the UQ Business School, The University of
Queensland, Australia, which is rated as Australia’s number 1 Business School
and highest ranked in the Asia-Pacific region. She currently is the Program
Coordinator of the Entrepreneurship and Innovation degrees at La Trobe
Business School and teaches innovation, entrepreneurship, marketing and
management courses. She has previously been on the business
faculties of Deakin University, The University of Queensland, Queensland
University of Technology and Duquesne University (USA). Her research
interests are: international entrepreneurship, technology innovation and sport
entrepreneurship.

1 Introduction

Schumpeter (1934) maintained that company owners are individuals taking on the
function of supervising the production of new combinations of resources with the
entrepreneurial function thus consisting of identifying and engaging with new
opportunities in the economy. However, it was only in the 1980s that there emerged an
interest in the role of entrepreneurship and economic development, which was shaped by
the revolution in endogenous growth theory (Low and MacMillan, 1988). This
breakthrough triggered a new wave of research that placed the individual capacity to
confront and cope with risk at the centre of economic analysis (Groot et al., 2004).
However, the risk dealing capacity represented only one, even if precociously studied, of
the factors characteristic of entrepreneurship (Kihlstrom and Laffont, 1979; Parker,
1997). Correspondingly, entrepreneurial activities, along with all of the factors
underlying their existence, and their respective influence on economic regional
development have been subject to study by a diverse range of authors (e.g. Arauzo and
Manjón, 2004; Birley, 1985; Kirchoff and Phillips, 1988; Storey, 1994). In addition, the
relationship between entrepreneurship and economic growth, diverse authors concluded
 Entrepreneurship, innovation and competitiveness 75

that the former proves fundamental to the latter and hence the relevance of understanding
the role of entrepreneurs given the contribution made in terms of both creating
employment and advancing with innovation (Thurik and Wennekers, 2004; Welter and
Lasch, 2008; Wennekers and Thurik, 1999). Entrepreneurship has more recently been
defined as the creating of new economic activities (Davidsson et al., 2006). While
entrepreneurs are subject to individual level analysis, they actually operate at the
organisational, economic, social and institutional levels (Veciana and Urbano, 2008).
According to Drucker (1985), innovation is a specific instrument to entrepreneurs.
This constitutes the act endowing resources with a new capacity for creating wealth.
Hence, correspondingly, the innovating companies thus tend to present better economic
and financial performances than their non-innovative counterparts (Fernandes et al.,
2013; Ferreira et al., 2010). Innovation thus proves fundamental to survival and
prevailing in an increasingly globalised world in most sectors of the economy. Innovation
aids companies in responding to diversified and constantly evolving demand whilst
enabling improvements across the different domains and activities of a society (Cooke,
1998). Hence, innovation is perceived as the motor driving progress of competitiveness
and economic development (Johansson et al., 2001; Romer, 1994). We may therefore
correspondingly verify the importance attained by innovation, entrepreneurship and
competitiveness but there has not been any simultaneous study of these three concepts.
To this end, our research seeks to provide a contribution to the study of the effects of
entrepreneurship and innovation on competitiveness and, as not all countries share the
same level of performance and growth, we made recourse to the GEM database to better
reflect these differences at the global level. Thus, this study seeks to contribute towards
the literature through the simultaneous analysis of entrepreneurship, innovation and
competitiveness. To this end, we analyse the influence of entrepreneur profiles in terms
of their intrinsic and extrinsic knowledge in terms of innovation and competitiveness.

2 Literature review

Innovation takes place within a specific social, cultural, economic and political
environment and displays systemic characteristics (Cooke, 1998). Innovation is defined
as the process through which opportunities get transformed into practical utilities (Tidd
et al., 1997). The effective implementation of innovation has come in for increasing
recognition as a synonym for the construction of sustainable competitive advantage and
therefore strengthening organisational performance levels (Koc and Ceylan, 2007).
Within an ever more competitive environment, innovation is a critical factor to
companies seeking to obtain a dominant position and as well as boosting their profits
(Hu and Hsu, 2008; Kaminski et al., 2008). There are various authors who defend that
innovation would seem to be the only way in which companies may adapt to the ever
more dynamic environments surrounding them (Doloreux and Melancon, 2008; Hua and
Wemmerlov, 2006; Roberts and Amit, 2003).
76 J.J. Ferreira et al.

The analysis of the introduction of new processes, products and ideas at the
organisational level, helps in evaluating the scope for measuring the innovative capacity
of companies and firms (Hurley and Hult, 1998). The innovation derived from the
flexibility of companies being able to choose between different options for meeting
consumer demands (Banbury and Mitchell, 1995), through a sustained strategy focused
on the company’s resources and capacities, enables not only the meeting of those
demands in the present but also into the future (Barney, 1991). Nevertheless, as
innovation proves a complex process, small and medium sized companies encounter
obstacles to innovation and only manage to innovate through cooperating with other
companies and optimising the application of their internal knowledge in combining this
with the specific competences of their partners (Ferreira et al., 2015; Muller and Zenker,
2001). Furthermore, there are obstacles on the road towards innovation. For example,
Kleinknecht (1989) identifies the following as obstacles to innovation:
1 scarcity of financial capital
2 lack of management relevant qualifications
3 difficulties in obtaining the technological information and know-how necessary to
innovation.
The growing utilisation of information flows represents an essential dimension to
establishing the organisational capacities capable of generating the foundations
fundamental to organisational success (Cohendet and Steinmueller, 2000). In addition,
Bughin and Jacques (1994) state that the major stumbling block to innovation does not
stem from the ‘myopia’ companies suffer from but is rather bound up with the incapacity
of firms to implement what they designate the ‘key principles of management’:
1 efficiency in marketing and R&D
2 synergies between marketing and R&D
3 capacity to communicate
4 excellence in organising and managing innovations
5 protecting innovation.
This conveys how internal R&D, for the majority of companies, does not prove sufficient
for firms to become able to identify and leverage innovation.
New products require new capacities or, at the very least, a new means of combining
the already existing competences (Koch and Strotmann, 2008; Ratten, 2015). These new
competences, as a pre-condition to the generation of new products and services may be
seen as a result of the acquisition, assimilation and dissemination of new knowledge
(Cohen and Levinthal, 1989, 1990) and may correspondingly be labelled the innovative
capacity. This innovative capacity derives from individual level competences, the
pre-acquired knowledge and the specific competences of companies as well as recourse
to the diverse means and modes of knowledge (Cohen and Levinthal, 1990). Very
commonly, and in particular at small innovative firms, these idiosyncratic internal
capacities prove particularly related with the profile of their entrepreneurs and thus
interlinked with their experiences, motivations, networks, creativity and strategic
orientation as well as the innovation activities ongoing (Lynskey, 2004; Webster, 2004).
 Entrepreneurship, innovation and competitiveness 77

Efficient institutions and a culture of support for entrepreneurship may render the
capture of perceived opportunities feasible by economic actors (Sautet and Kirzner,
2006). Regions with entrepreneur favourable institutions and a similarly suitable culture
may boost their competitive advantage and thereby attract investment in addition to
qualified and talented staff (Turok, 2004). The regions with strong business traditions
display a high level of competitive advantage (Audretsch and Fritsch, 2002; Mueller,
2006; Parker, 2004). Kirzner (1973) correspondingly defends entrepreneurs as dynamic
actors in fostering market equilibrium and beyond acknowledging their activities as
essential to sustaining competitiveness. From the outset, competitiveness proves inherent
to the entire extent of the entrepreneurial process.
Competitiveness would seem a simple concept around which there is little scope for
disagreement. According to the Concise Oxford Dictionary, competing is striving for
superiority in a particular quality. However, it is only when we actually attempt to
measure competitiveness that we begin understanding the difficulties involved in its
definition as competitiveness proves just as much a relative concept as it does a general
concept (Scott and Lodge, 1985). Other difficulties emerge out of both selecting the
appropriate unit of analysis and the perspective of the respective analyst. Politicians are
interested in economic competitiveness (national, regional or local), industries and
business associations restrict their interests to their own particular industry whilst
entrepreneurs and managers focus on the capacities of their own respective companies to
compete in specific markets.
Scott and Lodge (1985) perceive national competitiveness as the capacity of a country
to create, produce and distribute either products or services within the scope of
international trade and earning increased returns on the resources applied. They
furthermore observe how this capacity increasingly derive from the strategic orientations
adopted and correspondingly decreasingly resulting from the natural resources and skills
in effect. As Newall (1992) proposes, competitiveness incorporates the production of
ever more goods of ever better quality alongside services that are retailed successfully to
internal and external consumers. This results in companies getting well rewarded and
therefore able to generate the resources necessary to supply an appropriate infrastructure
for the provision of public services and support for the socially disadvantaged parts of
society. The Organization for Economic Cooperation and Development (OECD), in its
report on global competitiveness, defines competitiveness as the level at which a country
may, under free and fair market conditions, produce goods and services that meet the
demands prevailing in international markets whilst simultaneously maintaining and
expanding the real earnings of their people into the long term. However, the literature
proves not to have any generally accepted definition for competitiveness. The concept
may perhaps be overly broad and too complex to fit into any single universal application.
Porter (1990) is one researcher who contributes to the wide variety of perspectives on
competitiveness while Krugman (1996) argues that bad politics at the national level have
resulted in an obsession over the nature of competitiveness.
The problems surrounding international competitiveness have received a range of
different definitions. These (and the solutions thereby proposed for dealing with the
problems) are not only at partially mutually inconsistent but also entirely confusing to the
majority of academics, politicians, political decision makers and business managers.
Spence and Hazard (1998) refer to how there are good reasons for such confusion with
the collection of issues falling within the complexity of the ‘competitiveness’ framework.
78 J.J. Ferreira et al.

Misunderstandings are common whether in terms of empirical effects and policy

consequences or in terms of actually defining the problem.
Recently, Schwab (2010) has defined competitiveness as a set of institutions, policies
and factors determining the level of productivity of any given economy and its resulting
capacity to generate wealth and returns on investment and thus explaining the potential
for economic growth. This structure rests on twelve core pillars: institutions;
infrastructures; the prevailing macroeconomic environment; primary level healthcare and
education; higher education and training; the efficiencies of the goods markets; the level
of employment market efficiency; the level of financial market sophistication; the
technological level; market scale; the level of business sophistication; and innovation.
From the Porter and Stern (2001) perspective, there is a set of factors transversal to
the economy that acts in support of innovation, including the human and financial
resources allocated to making scientific and technological progress, the level of
technological sophistication, the public policies targeting innovation related activities,
which cover the protection of intellectual property, fiscal incentives for innovation,
implementation and encouragement for antitrust laws preventing abuse of market powers,
encouraging innovation based on market competition and the overall openness of the
economy to trade and investment. Innovation has become a decisive challenge within the
framework of global competitiveness; in order to obtain success, companies need to
know how to accept this challenge and leverage the advantages to their respective
location for the creation and commercialisation of new ideas. In advanced economies,
producing standard products, through recourse to standard methods, does not enable the
attainment of competitive advantage. Companies have to prove able to innovate in global
marketplaces, creating and launching a flow of new products, displacing the frontier of
the technological state of the art and evolving faster than their rivals (Porter and Stern,
2001). This global innovativeness is characterised by their capacity to, within the scope
of free and fair markets, produce goods and services able to meet the needs of the market,
maintaining and expanding the flow of earnings to their surrounding population into the
long term (Budd and Hirmisf, 2004).
In turn, entrepreneurship has taken up a central role in economic and industrial
policies spanning the setting up of new businesses, the development of new business
opportunities in already existing organisations and defined under the auspices of the
Global Entrepreneurship Monitor (GEM) project as any attempt to launch a new business
or new initiative, including self-employment, a new business organisation or the
expansion of an existing business (GEM, 2007). This has meant that entrepreneurship
constitutes a high risk dynamic and a highly binomial approach – rewarding in that the
success of an entrepreneur very commonly stems from a mixture of luck, a good idea,
possession of the right information combined with actions resulting from competitive
decision-making. The relevant information should integrate into a project and a business
plan based upon the sources of opportunity and other business and entrepreneurship
related research (for example, digital databases as sources of information and local
centres of economic development) (Kirkwood, 2010; Ratten, 2014).
 Entrepreneurship, innovation and competitiveness 79

3 Methodology

3.1 Data
The data subject to analysis incorporates aggregate data at the national level sourced from
the GEM) and the Global Competitive Index (GCI) for the years between 2009 and 2013
and representing a non-balanced panel (2009: 49 countries; 2010: 57 countries; 2011:
55 countries; 2012: 64 countries; 2013: 63 countries). Table 1 presents the countries
featured in the study alongside the corresponding year(s) and the level of economic
development.
Table 1 Countries, level of development and year

Country Stage 2009 2010 2011 2012 2013

Algeria 1 X X X
Angola 1 X X
Argentina 2 X X X X X
Australia 3 X X
Austria 3 X
Bangladesh 1 X
Barbados 2 X X
Belgium 3 X X X X X
Bolivia 1 X
Bosnia and Herzegovina 2 X X X X X
Botswana 1 X X
Brazil 2 X X X X X
Canada 3 X
Chile 2 X X X X X
China 2 X X X X X
Colombia 2 X X X X X
Costa Rica 2 X X
Croatia 2 X X X X X
Czech Republic 3 X X
Denmark 3 X X X X
Dominican Republic 2 X
Ecuador 2 X X X X
Egypt 1 X X
El Salvador 2 X
Estonia 2 X X
Ethiopia 1 X
Finland 3 X X X X X
France 3 X X X X X
80 J.J. Ferreira et al.

Table 1 Countries, level of development and year (continued)

Country Stage 2009 2010 2011 2012 2013

Germany 3 X X X X X
Ghana 1 X X X
Greece 3 X X X X X
Guatemala 3 X X X X
Hong Kong 3 X
Hungary 2 X X X X X
Iceland 3 X X
India 1 X
Indonesia 2 X
Iran 1 X X X X
Ireland 3 X X X X
Israel 3 X X X X
Italy 3 X X X
Jamaica 3 X X X X
Japan 3 X X X X X
Jordan 2 X
Korea 3 X X X X X
Latvia 2 X X X X X
Lebanon 1
Libya 1 X
Lithuania 2 X X X
Luxembourg 3 X
Macedonia 2 X X X
Malawi 1 X X
Malaysia 2 X X X X X
Mexico 2 X X X X
Montenegro 2 X
Morocco 1 X
Namibia 2 X
Netherlands 3 X X X X X
Nigeria 1 X X X
Norway 3 X X X X X
Pakistan 1 X X X
Panama 2 X X X X
Peru 2 X X X X X
Philippines 1 X
Poland 2 X X X
Portugal 3 X X X X
 Entrepreneurship, innovation and competitiveness 81

Table 1 Countries, level of development and year (continued)

Country Stage 2009 2010 2011 2012 2013

Puerto Rico 3 X
Romania 2 X X X X X
Russia 2 X X X X X
Saudi Arabia 1 X X
Serbia 2 X
Singapore 3 X X X
Slovakia 5 X X X
Slovenia 3 X X X X X
South Africa 2 X X X X X
Spain 3 X X X X X
Suriname 2 X
Sweden 3 X X X X
Switzerland 3 X X X X X
Syria 1 X
Taiwan 3 X X X X
Thailand 2 X X X
Trinidad and Tobago 1 X X X X
Tunisia 2 X X
Turkey 2 X X X
Uganda 1 X X X X
United Arab Emirates 3 X X
UK 3 X X X X
USA 3 X X X X X
Uruguay 2 X X X X X
Venezuela 1 X X
Vietnam 1 X
Yemen 0
Zambia 1 X X

3.2 Measures
3.2.1 Dependent variable
This analysis made recourse to the GCI (GCI databases) as its dependent variable.

3.2.2 Predictor variables

• TEA: Proportion of persons engaged in business start-up activities (TEA)
(GEM databases).
• Entrepreneur profile: Existing knowledge and exposure to external knowledge.
82 J.J. Ferreira et al.

• Existing knowledge: The variables applied prior experience in setting up businesses,

that is, the proportion of persons currently owner-managers running businesses
(Ownmge), and perceptions as to respondent capacities to launch a new business,
especially the proportion of persons who have the required knowledge/skills to start
businesses (Suskil) (GEM database).
• Exposure to external knowledge: The evaluation of informal networks adopted the
proportion of persons who know someone who started a business in the past two
years (Knoent) and the proportion of persons who was an informal investor in the
last three years (Busangvl) (GEM database).
• Innovation: innovation was evaluated in terms of the capacity for innovation
(Innov1), the quality of scientific research institutions (Innov2), company spending
on R&D (Innov3), university-industry R&D collaboration (Innov4), government
procurement of advanced technological products (Innov5) and the availability of
scientists and engineers (Innov6) (GCI databases).
Table 2 presents a summary of the variables and indicators applied in the empirical study.
Table 2 Applied analytical variables

Variable/indicator Measure Database

GCI 1–7 (best) GCI
Persons engaged in business start-up activities % GEM
Persons currently owner-managers running business % GEM
Persons who have required knowledge/skills to start business % GEM
Persons who know someone who started a business in the past two years % GEM
Persons who were informal investors in the last three years % GEM
Capacity for innovation 1–7 (best) GCI
Quality of scientific research institutions 1–7 (best) GCI
Company spending on R&D 1–7 (best) GCI
University-industry collaboration in R&D 1–7 (best) GCI
Government procurement of advanced tech. products 1–7 (best) GCI
Availability of scientists and engineers 1–7 (best) GCI

3.3 Data analysis

Throughout all the analytical procedures, we applied the pooled data estimation method.
We first evaluated the validity of the constructs and correspondingly analysed the
reliability, the factorial validity, the convergent validity and the discriminant validity.
This research evaluated the construct validity through the means of:
1 composite reliability (CR), (CR > 0.70), as this tool is not susceptible to influence
from the number of items existing in each construct in contrast to Cronbach’s alpha
that deploys the loads of items extracted from the estimated model
2 factorial validity (factorial loads greater than 0.5 and ideally greater than 0.7)
 Entrepreneurship, innovation and competitiveness 83

3 convergent validity, through average variance extracted (AVE) assuming that there is
convergent validity whenever (AVE > 0.50)

4 discriminant validity, with the squared root of the AVE returned by the two
constructs due to be greater than the correlation between these two factors
(Barroso et al., 2010; Hair et al., 2010; Hulland, 1999).

Following the validation of the instrument and with the objective of validating the
hypotheses included within the scope of the conceptual model, we made recourse to
structural equation modelling (SEM), estimated through the partial least squares (PLS)
method. The application of PLS-SEM as an alternative to covariance-based SEM
(CB-SEM) stems from the inclusion of constructs containing but a single item, the items
making up the constructs were gathered according to different units of measurement and
alongside the existence of non-normal data and the assumptions as regards data
distribution in CB-SEM (Hair et al., 2010, 2011, 2012, 2014).
The model subject to estimation features in Figure 1.

Figure 1 Model under calculation

84 J.J. Ferreira et al.

Given that there are no measures for the goodness of the overall fit appropriate to models
estimated by PLS as, in the methodologies for covariance-based structural equations, the
structural models estimated by PLS get evaluated through the analysis of the values of the
coefficient determined by R2 for the endogenous constructs or alternatively the value of
the standardised root mean residual (SRMR) (Hair et al., 2011; Hulland, 1999). In order
to evaluate constructs potentially generating multicollinearity, we evaluated the variance
inflation factors (VIF).
In the structural model estimations, in order to determine the T statistics and their
respective statistical significance, we carried out 1,000 replicas of the sample.
Finally, we proceeded with analysis of the difference in parameters relating to the
three stages of the respective countries (Stage 1: factor driven; Stage 2: efficiency driven;
and Stage 3: innovation driven). To this end, we implemented multi-group analysis given
that the difference might derive from unobserved heterogeneity and hence not susceptible
to attribution to one or more of the pre-specified variables (Sarstedt et al., 2011). In order
to determine the statistically significant differences between the path coefficients of the
three models, we deployed Henseler’s approach (Sarstedt et al., 2011). Throughout all of
these estimations, we applied the SmartPLS version 3.2.1 software (Ringle et al., 2014).

4 Results

4.1 Variable reliability and validity

Table 3 presents the results stemming from the descriptive statistics [average and
standard deviation (SD)], AVE, CR, Cronbach’s alpha, Pearson’s correlation between the
constructs and the square root of AVE in order to evaluate the validity and reliability and
VIF within the scope of ascertaining any potential origins of multicollinearity in the SEM
calculations. All the constructs subject to analysis returned high levels of reliability, with
0.819 proving the lowest CR returned. As regards the factorial validity, the standardised
factorial weightings were greater or equal to 0.771 and thereby attaining factorial
validity. The AVE results were equal to or greater than 0.694 and the respective squared
root was always greater than the correlation between the particular construct and the
remainder and hence confirming the convergent and discriminant validities. These results
serve to demonstrate the validity and reliability of the variables subject to analysis by this
study.

4.2 Structural equation modelling

The VIF results were equal to or lower than 1.78 reporting the absence of
multicollinearity in the estimations. The SEM-based modelling returned an acceptable
adjustment index given that the SMRM = 0.078 and the R2 were 0.767 and 0.212 and
0.897 for the endogenous constructs for being engaged in business start-up activities,
innovation and the GCI, respectively.
 Table 3

Entrepreneurship, innovation and competitiveness

the constructs
Average, SD, AVE, CR, VIF and Pearson’s correlations for the relationships between
Mean SD VIF AVE CR Alpha 1 2 3 4 5
1 GCI 4.49 0.62 1.000 1.000 1.000 1.000
2 Existing knowledge base 29.94 11.08 1.78 0.775 0.873 0.712 –0.591 0.881
3 Exposure to external knowledge 20.78 8.09 1.78 0.694 0.819 0.588 –0.426 0.662 0.833
4 Being engaged in business start-up activity 11.85 7.85 1.27 1.000 1.000 1.000 –0.532 0.870 0.649 1.000
5 Innovation 3.99 0.78 1.27 0.814 0.963 0.953 0.940 –0.502 –0.355 –0.461 0.902
Note: The diagonal in bold contains the squared root of AVE.

85
 Table 4

86
J.J. Ferreira et al.
p-value of bootstrapping estimation
Standardised path coefficients of estimated SEM, standard error (SE), T statistics and
Beta Bootstrapping SE t p
Existing knowledge base → Being engaged in a business start-up activity 0.784 0.775 0.037 21.05 0.000*
Exposure to external knowledge → Being engaged in a business start-up activity 0.130 0.142 0.049 2.65 0.008*
Being engaged in a business start-up activity → Innovation –0.461 –0.461 0.032 14.20 0.000*
Being engaged in a business start-up activity → GCI –0.125 –0.125 0.028 4.41 0.000*
Innovation → GCI 0.883 0.883 0.017 51.92 0.000*
Note: *p < 0.05.
 Entrepreneurship, innovation and competitiveness 87

Figure 2 Estimated standardised path coefficients

Table 4 and Figure 2 detail the results returned from the estimated structural model. As
regards the being engaged in a business start-up activity construct, our results
demonstrate that the existing knowledge base (β = 0.784; p < 0.01) and exposure to
external knowledge (β = 0.130; p < 0.01) constructs generate a statistically significant
impact on the being engaged in a business start-up activity construct. The higher the
score for the existing knowledge base and exposure to external knowledge construct, the
higher the score for the entrepreneurial intention construct. Hence, we thus verify how
the entrepreneur profile proves critical to growth and the triggering of entrepreneurial
activities. As defended by various authors, the intrinsic capacities of individuals to take
on exposure to risk and to recognise the opportunities present both foster entrepreneurial
activities (Kihlstrom and Laffont, 1979; Parker, 1997).
As regards the innovation construct, the being engaged in a business start-up activity
(β = –0.461; p < 0.01) construct reports a statistically negative impact as the higher the
score returned by the being engaged in a business start-up activity construct, the lower
the scores resulting from the innovation construct. Finally, in terms of the GCI, the being
engaged in a business start-up activity (β = –0.125; p < 0.01) and innovation (β = 0.883;
p < 0.01) constructs hold a statistically significant impact on the GCI given that the
88 J.J. Ferreira et al.

higher the score for the being engaged in a business start-up activity, the lower the GCI
result whilst the higher the innovation construct result, the higher the level of the GCI.
We may therefore state that entrepreneurship and innovation are central facets to the
process of economic creativity as well as fostering knowledge, boosting both productivity
and employment. Therefore, competitiveness emerges out of a dynamic process with the
level of development shaped by the interaction between the ongoing market conditions
and the returns on investment in innovation. These R&D investments help in changing
company lines of growth due to the fact that new products, new processes and new
organisational methods may alter the composition of markets (Audretsch and Fritsch,
2002; Parker, 2004).

4.3 Multigroup analysis

Finally, multigroup analysis was applied to test for the existence of statistically
significant differences between the three phases of economic development in relation to
the standardised path coefficients. Table 5 displays the results returned by the structural
models estimated for each of the three economic stages. As regards economies in the first
stage, we may observe how the existing knowledge base (β = 0.579; p < 0.01) and
exposure to external knowledge (β = 0.362; p < 0.01) constructs generate a positive and
statistically significant impact on the being engaged in a business start-up activity
construct. In turn, this construct (β = –0.429; p < 0.01) returns a statistically significant
negative impact on the GCI all the while innovation (β = 0.615; p < 0.01) generates a
statistically significant positive impact on the GCI.
In the case of second stage economies, we observe how the existing knowledge base
(β = 0.767; p < 0.01) and exposure to external knowledge (β = 0.174; p < 0.01) constructs
provide a statistically significant positive impact on the likelihood of being engaged in a
business start-up activity construct. Furthermore, the innovation construct (β = 0.883;
p < 0.01) reports a statistically significant positive impact on the GCI.
Finally, in third stage economies, we report that the existing knowledge base
(β = 0.722; p < 0.01) construct generates a positive and statistically significant impact on
the being engaged in a business start-up activity construct and the innovation (β = 0.928;
p < 0.01) construct also returns a statistically positive impact on the GCI. These results
once again affirm the conclusions of GEM (2014) who stated that individuals operating
in factor-driven economies tend to show more positive attitudes towards business
environments fostering perceived opportunities to start a business and perceived skills to
start a business in comparison with individuals in efficiency-driven and innovation-driven
economies. In addition, despite the diverse economies reporting a higher level of TEA,
this does not correspondingly reflect in terms of the level of innovation and of
competitiveness and due precisely to the capacity of these individuals to be able to
prosper in the businesses they set up and run (GEM, 2014).
Table 6 summarises the results of the comparisons between the groups of pairs
(pairwise group comparisons) of the estimated path coefficients (Stage 1 vs Stage 2;
Stage 1 vs Stage 3, Stage 2 vs Stage 3). Not one of these comparisons displays any
statistically significant differences impacting on the innovation construct in the GCI.
 Table 5

Entrepreneurship, innovation and competitiveness

estimation, by country
Standardised path coefficients of estimated SEM and p-value of bootstrapping
Beta Bootstrapping SE t p
Existing knowledge base → Engaged in a business start-up activity 0.579 0.594 0.082 7.10 0.000*
Exposure to external knowledge → Engaged in a business start-up activity 0.362 0.342 0.091 3.99 0.000*
Stage 1

Engaged in a business start-up activity → Innovation –0.092 –0.105 0.169 0.54 0.588
Innovation → GCI 0.615 0.615 0.094 6.55 0.000*
Engaged in a business start-up activity → GCI –0.429 –0.416 0.090 4.76 0.000*
Existing knowledge base → Engaged in a business start-up activity 0.767 0.763 0.061 18.85 0.000*
Exposure to external knowledge → Engaged in a business start-up activity 0.174 0.182 0.072 3.03 0.003*
Stage 2

Engaged in a business start-up activity → Innovation –0.075 –0.074 0.129 0.77 0.441
Innovation → GCI 0.883 0.883 0.019 32.94 0.000*
Being engaged in business start-up activity → GCI 0.047 0.048 0.037 0.99 0.323
Existing knowledge base → Engaged in a business start-up activity 0.722 0.719 0.041 11.91 0.000*
Exposure to external knowledge → Engaged in a business start-up activity –0.019 0.001 0.057 0.26 0.795
Stage 3

Engaged in a business start-up activity → Innovation –0.049 –0.033 0.098 0.38 0.706
Innovation → GCI 0.928 0.928 0.027 48.00 0.000*
Engaged in a business start-up activity → GCI 0.015 0.016 0.048 0.41 0.682
Note: *p < 0.05

89
 Table 6

90
J.J. Ferreira et al.
Standardised path coefficient differences, Henseler’s multigroup analysis
| St 1 – St 2 | p | St 1 – St 3 | P | St 2 – St 3 | p
Existing knowledge base → Being engaged in a business start-up activity –0.188 0.013* 0.188 0.040* –0.143 0.071
Exposure to external knowledge → Being engaged in a business start-up activity 0.381 0.001* 0.045 0.730 0.193 0.018*
Being engaged in a business start-up activity → Innovation –0.017 0.556 0.043 0.600 0.027 0.564
Innovation → GCI –0.268 0.000* 0.477 0.000* –0.313 0.000*
Being engaged in a business start-up activity → GCI 0.444 0.000* –0.045 0.075 0.032 0.703
Notes: *p < 0.05; St 1 – Stage 1; St 2 – Stage 2; St 3 – Stage 3
 Entrepreneurship, innovation and competitiveness 91

Comparing the results from stage 1 economies with those in stage 2, we observe how the
existing knowledge base (βdiff = –0.188; p < 0.01) construct generates an impact of
significantly greater magnitude on the being engaged in a business start-up activity
construct in stage 2 economies than in their stage 1 counterparts all the while the
exposure to external knowledge (βdiff = 0.188; p < 0.01) construct returns an impact of a
significantly greater magnitude on the being engaged in a business start-up activity
construct in stage 1 economies than in their stage 2 peers. Furthermore, in stage 2
economies, the impact of innovation (βdiff = –0.268; p < 0.01) on the GCI proves
significantly higher than in stage 1 economies whilst in the latter the impact of the being
engaged in a business start-up activity (βdiff = 0.477; p < 0.01) construct on the GCI is
significantly higher than in stage 2 economies.
When comparing stage 1 economies with stage 3 economies, we find that the
exposure to external knowledge (βdiff = 0.381; p < 0.01) construct results in an impact of
a significantly greater magnitude on the being engaged in a business start-up activity
construct in stage 1 economies than those in stage 3. In the stage 3 economies, the impact
of innovation (βdiff = –0.313; p < 0.01) on the GCI proves significantly higher than in
stage 1 economies even while in the latter the impact of the being engaged in a business
start-up activity (βdiff = 0.444; p < 0.01) construct on the GCI attains a significantly
higher level than in stage 3 economies.
Comparing the stage 2 economies with those in stage 3 finds only that the exposure
to external knowledge (βdiff = 0.193; p < 0.01) construct generates an impact of a
significantly greater magnitude on the being engaged in a business start-up activity
construct in stage 2 economies than it does in their stage 3 peers.

5 Final considerations

The late 1980s saw a rebirth of interest in the role of entrepreneurship in the economy.
This interest was undoubtedly based on the re-discovery of the seminal work by
Schumpter (1934) approaching the role played by innovative entrepreneurs within the
overall macroeconomic performance. Schumpeter maintains that through the introduction
of new combinations of products and markets, entrepreneurs generate new means of more
efficient production whilst simultaneously driving poorly performing companies out of
the market: a process of ‘creative destruction’. Whilst various studies have highlighted
the importance of entrepreneurship as a field of study undergoing rapid development,
Reynolds et al. (1994) verify that there are no internationally comparable data on
entrepreneurship and the founding of companies and hence the current importance placed
on making these comparisons at the international level. Thus, we may here characterise
more precisely that which the GEM terms the Entrepreneurial Framework Conditions
(EFCS). Right from its outset, the GEM project proposed that entrepreneurial activities
are shaped by a distinctive group of factors, the aforementioned EFCS and these
constitute the oxygen necessary to the flourishing of resources, incentives, markets and
institutions acting in support of the growth and development of new companies (Bosma
et al., 2008). Hence, different countries and their different regions may be expected to
display different EFCS or different ‘rules of the game’ and that these impact on the churn
taking place across business sector activities.
92 J.J. Ferreira et al.

As our study demonstrates, different stages of the economy imply different

characteristics in terms of entrepreneurial activities. Furthermore, we also verify how
there is a need to look beyond the TEA as otherwise it would not prove possible to grasp
how lesser developed countries may report a TEA greater than more developed countries.
We would thus then be in contradiction of the premise that entrepreneurship proves the
motor of economic development and acts as a driver of competitiveness. In order to
answer these questions, we also applied the GCI and thereby conveying how perceptions
as to the conditions favourable to entrepreneurship, their effectiveness and maturity
reflect on there still being a long road ahead. We find that in relation to first stage
economies, the entrepreneurial profile generates a positive impact on the launching of
companies even while this generates a contrary effect in terms of the GCI given that
innovation, when implemented, returns a statistically significant positive impact on the
GCI. In the case of second stage economies, we report how the entrepreneurial profile
returns a positive impact on the founding of new companies. Along with the innovation
construct, this effect carries over to the GCI. Finally, the third stage economies
demonstrate a positive experience for each of the three constructs and thus the
entrepreneur profile has a positive effect on innovation and this has a positive impact on
the GCI. We may thus state we believe that entrepreneurial thinking contributes to
economic development as entrepreneurs set up new companies and consequently generate
new employment. In addition, this helps internationalisation of firms as there is more
likelihood of guaranteeing product and service variety, intensifying competition and to
the extent of potentially boosting productivity through technological changes.

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