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Defining and Measuring Entrepreneurship for Regional Research: A New Approach
  • Sarah A. Low

A strong correlation might exist between entrepreneurship and long-term regional

employment growth (Acs and Armington, 2003). Entrepreneurship may be a more

sustainable economic development strategy than alternatives, like industrial recruitment,

because entrepreneurs tend to locate in their home region. Research and policies on

fostering entrepreneurship are hindered, however, by the lack of a clear definition and

measure of entrepreneurship (Bruyat and Pierre-Andre, 2000). Multiple definitions of

entrepreneurship, often flawed, lead to contradictory findings that fuel policymaker

confusion (Tamasy, 2006). Most importantly, the commonly used measures of

entrepreneurship ignore innovation—a long established defining attribute of

entrepreneurship for economic development. This is problematic because only a fraction

of new businesses are innovative (Audretch, 2005). Reliable measures of

entrepreneurship must be developed to make possible better economic development

research and more effective economic development strategies.

In this dissertation, I develop a definition and regional measure of

entrepreneurship that will aid entrepreneurship research and economic development

policy. I address defining and measuring entrepreneurship, posit a comprehensive

definition of entrepreneurship, and develop a method for measuring entrepreneurship that

does not ignore the innovation attribute. I test the relationship between economic growth

and the new entrepreneurship measures, and estimate the determinants of

entrepreneurship using the new measures. The measure I develop is unique, differing

from other available measures because it measures the most innovative of entrepreneurs.

Chapter 1 motivates the need for a different regional measure of entrepreneurship.

Chapter 2 posits a three-part definition of entrepreneurship, with roots in the work of

early entrepreneurship scholars including Schumpeter, Knight, and Say. Chapter 3

reviews current measures of entrepreneurship and compares them to the I present a multifaceted

definition of entrepreneurship and create an annual county-level indicator that

incorporates innovation—a commonly overlooked aspect of entrepreneurship. The lack

of a clear definition and measure of entrepreneurship hinders the research informing

entrepreneurial support policies (Bruyat and Pierre-Andre, 2000). Confusion amongst


policymakers arises from definitions that are either incomplete or contradictory (Tamasy,

2006). Despite measurement problems, entrepreneurial support programs are popular and

effective economic development strategies. Since entrepreneurs often locate in their

home region, entrepreneurial support may prove to be a more effective economic

development strategy than prominent strategies such as industrial recruitment. Stronger

economic development research and more effective economic development strategies

require more reliable measures of entrepreneurship.

Chapter 4 develops new indicators of entrepreneurship that capture all three

components of the proposed definition. The identification of innovative industries,

industries with high level of skill, technology, patents, churn, and employment growth,

using detailed NAICS (North American Industrial Classification System) industry data,

represents an important contribution of this dissertation. By applying the innovative

industries to single-unit employer establishment birth and self employment data, I create

county-level measures that are available annually for all counties. Using the reducedform

model of entrepreneurship developed by Goetz and Rupasingha (2008), Chapter 5

assesses the determinants of the new entrepreneurship indicator. In Chapter 6, I use a

growth model recently developed at the U.S. Department of Agriculture’s Economic

Research Service (McGranahan, Wojan, and Lambert, 2009) to examine the relationship

between my new indicator of entrepreneurship and economic growth. I find a positive

and robust relationship between growth and my new indicator of entrepreneurship.

Chapter 7 reviews the results and addresses policy-implications, problems, and future


My new indicators represent an improvement over current measures of

entrepreneurship and have the potential to improve entrepreneurship research and

policymaking. The chief contribution of these new measures is that they incorporate

innovation, which others ignore. These indicators are imperfect, but nevertheless

represent a significant contribution to the literature and can stimulate discussion among

entrepreneurship scholars about how we conceptualize and measure entrepreneurship.

Publication Date
Summer 2009
Citation Information
Sarah A. Low. "Defining and Measuring Entrepreneurship for Regional Research: A New Approach" (2009)
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