The impact of the economic crisis on latent and early entrepreneurship in Europe

Abstract

The recent economic crisis has thrown many European economies into a period of slow growth and high unemployment. While previous research looked at the impact of the crisis on aggregate indicators of entrepreneurship, not much is known about whether and how it affected individual motivations and efforts to become self-employed. This study aims to fill this gap by looking at the impact of the crisis on latent and early entrepreneurship, as well as on the link between the two. We combine individual and country-level data from 25 EU member states from 2006 to 2012. Results of multilevel logistic regressions show that the decrease in entrepreneurial activity in the post-crisis period has been stronger in countries where access to finance for SMEs has been more difficult. Moreover, we show that the high level unemployment generated by the economic crisis has produced a “refugee effect” by pushing into entrepreneurship only those individuals who are not interested in such a career choice.