Entrepreneurship and Growth

An International Historical Perspective

Gabriel Tortella, Gloria Quiroga

• Publisher: Palgrave Macmillan
• Year: 2012
• Print ISBN: 9781349441464, 9781137033345
• eBook ISBN: 9781137033352
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

A collection of eight articles by 17 specialists, this volume provides very recent research on the factors which contribute to the build up of entrepreneurship. Offers an international, comparative and historical perspective, with a special focus upon the Mediterranean.

Part I

A Multinational Approach

1

A Tale of Four Countries: Entrepreneurs and Entrepreneurship in England, France, Scotland, and Spain: A Comparative Approach

Gabriel Tortella, Gloria Quiroga, and Ignacio Moral-Arce

1 Introduction

Although subject to a long discussion, the idea that education has perceptible and positive economic effects is as old as the economic science itself. We can read clear references to it in Cantillon (1952 [1755], pp. 10–13), who sees the profit motive as the main reason for young people to get an education; and in Adam Smith (1937 [1776], p. 101), who wrote: ‘A man educated at the expence of much labor and time [ ... ] may be compared to one [ ... ] expensive machine’ and then went on to equate education with capital. John Stuart Mill (1900 [1848], pp. 104–10) linked ‘the productiveness of the labor of a community’ to ‘the skill and knowledge therein existing’ and bemoaned that ‘the economical value of the general diffusion of intelligence among the people [is] not yet [ ... ] well understood and recognized’. Other luminaries could be cited, among them Alfred Marshall (1927) and Frank Taussig (1925). Joseph Schumpeter’s theory of economic development (1934, first German ed., 1911) posited that ‘the fundamental phenomenon of economic development’ was technical progress. These ideas enjoyed a powerful stimulus when Robert Solow (1957) and Theodore Schultz (1960), from very different methodological approaches, showed with glaring evidence the economic value of education and human capital, an expression which became common at around the time Solow and Schultz published their pathbreaking works. This was followed by a considerable amount of research and model building trying to use different definitions of ‘education’, ‘human capital’, or ‘knowledge’ as key variables explaining economic growth, the most celebrated of these being by Lucas (1988) and Romer (1990). More recent attempts have explicitly linked the ‘knowledge’ factor to the action of the entrepreneur, through a ‘theory of endogenous entrepreneurship’, according to which firm start-ups are ‘the endogenous response to investments in knowledge’ (Audretsch and Keilbach, 2009, p. 305).

In this paper, we try to test empirically the hypothesis that the performance of entrepreneurs is somehow related to their education. In the words of Audretsch and Keilbach, that ‘entrepreneurs are [ ... ] a response to high knowledge contexts’ (ibid.). To carry out this test, we analyze and compare databases of four countries: England, Spain, Scotland, and France, from sources which are described in Appendix I. We establish three possible indicators of entrepreneurial success and try to assess the validity of a series of social and educational variables as determinants of entrepreneurial success. We first summarize some results of our previous related research; then we describe our samples and carry out a descriptive analysis. In the second part of the paper, we perform a series of econometric tests. We find that educational factors have a more than acceptable predictive value in explaining entrepreneurial success, although this varies from country to country.

The period covered by these samples, i.e., the time span when our entrepreneurs were active is approximately 1850–1980, although the British samples comprise a greater share of those born in the nineteenth century (in the English case, 78.9 percent were born in the nineteenth century, in the Scottish case 97.6 percent were), while the continental ones are more evenly balanced (the corresponding French and Spanish percentages are 64.1 and 66.1) (See Table 1.1, Panel A). This seems normal given that the industrial revolutions in the Anglo-Saxon countries preceded those in the continental ones.

In our former papers (Tortella, Quiroga and Moral-Arce, 2010; 2011) we showed that education was a determining factor in the performance of entrepreneurs in the English and Spanish cases. We proposed several criteria for defining success (versatility, distinction, wealth) and saw that, especially in the case of English entrepreneurs, these criteria were statistically linked to educational variables, whereas in the Spanish case the link was rather tenuous. This seemed surprising at first sight since a significantly higher share of Spanish entrepreneurs had obtained university degrees than their English counterparts. In fact, English entrepreneurs have frequently been berated for the relatively low number of them who obtained college or university degrees (in this respect they compared unfavorably not only with Spanish entrepreneurs, but also with French and German ones: see de Miguel and Linz, 1964; Cassis, 1999), and English universities (and some secondary schools, in particular the so-called public schools) have been criticized for not gearing their curricula towards the needs of technicians and businessmen. Our research has shown, however, that things were not as dismal in English education as some critics have affirmed. From the entrepreneurial standpoint, it turned out that the strength of the English educational system lay in its middle (secondary) level: English secondary education offered a variety of possibilities, some of them focused upon the needs of entrepreneurs, managers, and technicians; the case in point was the apprenticeship system. But it was obvious also that a good education, even if it was not specifically intended for businessmen, had positive effects on entrepreneurial performance: the case in point was that of public schools, which have often been subject to reproach for having leaned heavily towards the humanities. Nevertheless, public schools scored highly in our entrepreneurial performance regressions, suggesting that a good humanistic education can serve managers and businessmen well (See also Berghoff 1990).

In contrast, although in Spain almost one half of the entrepreneurs had university degrees, secondary education offered little variety and was not intended at all for prospective businessmen. Furthermore, there were also a very high percentage of Spanish businessmen who did not even reach secondary education, so that the whole sample was divided into two halves: those educated at university level and those who had received very little education. As a result, the regressions in the Spanish sample showed very little relation between educational variables and entrepreneurial performance.

Regarding the British and Spanish samples, we refer the reader to our former papers (2010, 2011). Some comments on the Scottish and French samples are necessary.

Scotland is the smallest of the four countries studied and of course it was and is part of Great Britain and of the United Kingdom. In many ways it is obvious that Scotland’s economy is integrated in the British economy. This is shown, for instance in the much higher specialization and concentration of its businessmen by comparison with their English counterparts. Another sign of this integration is that one fifth of those Scottish businessmen who had college or university degrees had acquired them in England. Some notable examples are Edward Tennant, William Thomson (Lord Kelvin), and William Beardmore Jr.

Duality was another feature of Scottish society: there has been a traditional cleavage between the Lowlands and the Highlands, and this is reflected in the educational and occupational traits of its businessmen: highlanders had lower levels of apprenticeship, and a higher proportion of them had not even secondary studies. They also concentrated on two traditional sectors, Agriculture and Food Processing (which includes beverages), and Textiles, whereas lowlanders concentrated on more modern sectors such as Metallurgy and Machine Building, and Iron and Steel.

Of the four sets of entrepreneurs we are studying, the Scots were the group with the lower college or university training. In the words of Slaven (‘Conclusions’ in Slaven and Checkland, 1990, 2 vols, p. 430), ‘training on the job remained the norm for most proprietors of Scottish business. Many indeed graduated through apprenticeship [ ... ] Scottish entrepreneurs were rarely men of great technical expertise or profound learning’.

Scotland, however, enjoyed a robust secondary school system, which was reinforced after the Scottish Education Act of 1872. Rural districts were favored by the existence of an effective network of parish schools, supplemented with private schools; in the urban-industrial areas, the burgh schools had difficulty coping with the fast expansion of population; this was the main problem the 1872 Act endeavoured to solve by stepping up state intervention and by the subsidization of burgh schools. At the end of the nineteenth century, Scotland had achieved almost universal literacy of both sexes (the same was true of Britain as a whole, something only surpassed by the Scandinavian countries. Anderson, 1983, 1985; Sanderson, 1999, p. 3; Checkland and Checkland, 1984, pp. 111–16.).

Furthermore, there were some brilliant exceptions to the somewhat depressing educational picture portrayed by Slaven; some of these were cited just above. And, as our author says, ‘more formal technical and academic qualifications became more common among the owners of Scottish business after 1900’ (ibid.).

France seems to be the most meritocratic of our four countries. Three fifths of the businessmen in the French sample had university or college degrees, the highest proportion in our total sample, while the share of individuals of low class extraction was the highest. On top of having a solid secondary education based upon the lycée and the baccalauréat, France has a series of professional and specialized schools (the so-called grandes écoles) in addition to the universities. Among the most famous and older of these ‘grand schools’ are the Polytechnique, the École Normale, the École Centrale des Arts et Manufactures, the École Nationale d’Administration, the École de Sciences Politiques, plus the older engineering schools: École des Mines and the École des Ponts et Chaussées (civil engineering) and many others (there are often schools with the same name in different cities). There is ‘no official definition of grand schools, the title has no legal existence’, although there is an association called ‘Conference of Grand Schools’ (Daumas 2010, p. 789). Many of these (the Polytechnique is a case in point) are geared towards supplying the state with qualified officials, and their graduates must be public servants for a certain number of years at least; it is quite common, though, that they be later on hired by the private sector, a practice which receives the somewhat picturesque name of pantouflage (Daumas, 2010, pp. 796–803; according to Caron, 1997, p. 347, this is an ‘original aspect of the French business leadership’). In our sample almost three fifths of the businessmen with a college or university degree acquired it at one of these grand schools. From the standpoint of entrepreneurship, therefore, these schools are considerably more important than ordinary universities, and they are certainly more prestigious (the meritocratic character of French big firms was convincingly shown by Lévy-Leboyer, 1979).

We must now refer to some peculiarities of our French data. The Daumas Dictionnaire not only contains individual biographies; it contains several different types of articles referring to institutions and other related topics. It also has collective family biographies, for instance Famille Rothschild, Famille Peugeot, Famille Michelin, Famille Schlumberger, etc. In Daumas’ own words (p. 13): ‘When the family [ ... ] is more important than the individuals belonging to it, however remarkable they may be, the family article replaces the individual article’. Thus, the biographies of some of the most distinguished French entrepreneurs must be gleaned from these collective articles. They are thus often less complete than the biographies of individuals. We have been able to add information from other sources, but unfortunately, it has not been possible to carry out this addition as thoroughly as we would have wished. Of a total sample of 287 French entrepreneurs, the information about 83 of them comes essentially from the famille articles and in most cases we are lacking some vital elements, such as, especially, education. This is even more serious in our restricted elite sample (see later on), because many of these sagas (such as the ones we cited above) are outstanding entrepreneurial dynasties. If in the larger sample the proportion of famille biographies is 29 percent, in the elite sample this proportion is 40 percent. This explains especially some quirks in the comparison of the two samples in the French case; for instance that the elite should have a much higher share of ‘No studies or Unknown’ (Table 1.1, Panel B) than the elite samples of other countries and than the larger French sample. First, less information on the education of family members is provided in the famille articles; and second, it appears that members of established entrepreneurial families often did not attend grand schools or universities, since they considered that they could receive their training in the family firm – a sort of informal apprenticeship. Only 41 percent of members of familles studied at a grand school, while the equivalent proportion of individual entrepreneurs was 62 percent – something which accentuates the meritocratic character of French society (this is also established in Lévy-Leboyer, 1979, pp. 147, 164, 166). The heavy presence of family sagas in our French elite sample also explains why it has a relatively low proportion of self-made entrepreneurs while in all other cases the share of self-made in the elite is higher than in the larger samples.

2 Descriptive analysis

It has often been remarked that the biographical dictionaries of businessmen have certain biases. The main biases refer to sectoral occupation (see, for instance, Nicholas, 1999a, pp. 693–94, who says that the Jeremy dictionaries are ‘weighted towards manufacturing and mineral extraction’) and to the predominance of successful businessmen. The sectoral bias, as Nicholas asserts, should not affect tests on performance. As to the success bias, and other possible sample problems, we discussed them in a former paper (2010, pp. 84–5). Let us summarize our statements there: first ‘devising an unbiased sample of entrepreneurs is impossible’. Second, since we ar...

Table of contents

• Cover
• Title
• Introduction
• Part I  A Multinational Approach
• Part II  International Experiences
• Part III  The Spanish Case
• Part IV  Some Local Cases: Minorca and Madrid
• Bibliography
• Index