II. Entrepreneurship and employment

The contribution of entrepreneurship to generation of employment is one of most important issues in regional economic development. One popular perception is that entrepreneurship can create jobs, and it could be justified to support startups, especially during economic recessions. Despite of the perception, empirical evidence shows an inconclusive role of entrepreneurship in job creation.

It can be inferred that entry of entrepreneurs can create jobs, while the exit of firms diminish a number of jobs. It means that entrepreneurs immediately make more jobs when they initiate businesses, but they also destroy jobs by increasing the level of competition which can lead to shrink or exit of incumbents (Parker, 2009). Thus, the entire number of job is dependent on the ‘net employment growth rate’ that can be calculated by subtracting the job destruction rate from the job creation rate (van Praag & Versloot, 2007). However, it is not easily capture by a simple method, because of the fact that the dynamics of generating employment is highly complex, and requires a consideration of various conditions, including firm size, age, industry business cycle, and entry and exit rate.

An early stream of research about the effects of entrepreneurship on job creation is focusing on the short period results (Fritsch, 1997; Audretsch & Fritsch, 1996). For instance, Fritsch (1997) finds that there is significantly negative relationship between entry and regional employment change for the year of t+1 and t+2 in Germany. He explains the reason of negative relationship with that the positive impact of new firms has been overcompensated for by unexplained factors. In the conclusion part, entrepreneurship is less effective way for regional employment, at le...

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...ew businesses can create jobs as direct and immediate effects, whereas new entry can also lead to job losses by destroying incumbents through competitions in markets. When it takes account as a whole, the effect of entrepreneurship on employment should be carefully discussed in a long term for indirect effects.

Even though the previous findings have attempted to figure out the relationship between entrepreneurship and employment, it is necessary to consider the quality of employment and job satisfactions of employees. Arguably, the statistical data about employment is used for boosting for supporting small businesses and entrepreneurship, but the qualities of jobs provided by small firms fails to draw attention. Because of the fact that employees’ job satisfaction can also affect the success of entrepreneurship, more studies about the issues should be conducted.