The Territorial Economic Impact of Entrepreneurial Youthfulness

• Author: Esteban Lafuente,Eduardo Gómez‐Araujo
• Published date: 01 March 2016
• Date: 01 March 2016
• DOI: http://doi.org/10.1002/jsc.2055

RESEARCH ARTICLE

Strat. Change 25: 187–204 (2016)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.2055

Copyright © 2016 John Wiley & Sons, Ltd.

Strategic Change: Briengs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.2055

The Territorial Economic Impact of Entrepreneurial

Youthfulness1

Esteban Lafuente

Department of Management, Universitat Politècnica de Catalunya (Barcelona Tech),

Barcelona,Spain

Eduardo Gómez‐Araujo

School of Business, Universidad del Norte, Colombia

Entrepreneurship and the youth population interact to enhance economic

performance, and actions oriented to bring down social barriers linked to the fear

of entrepreneurial failure are as important as policies focused on access to nance or

human capital formation.

Introduction

Entrepreneurship is increasingly recognized as a critical ingredient for economic

growth, employment generation, innovation, and socio‐economic development

(OECD, 2003; Acs and Amoros, 2008; Wyrwich, 2012). Yet, do young entrepre-

neurs have a relatively greater impact on territorial economic performance?

According to the demographic perspective, young people promote the revitaliza-

tion of the local community (OECD, 2003); therefore, without renewal of popu-

lation, a territory cannot remain viable or maintain its social and economic

functions in the long term (Muilu and Rusanen, 2003). From an economic per-

spective, young individuals allow the renewal of the labor force (ILO, 2010). Also,

they can potentially become decisive factors for territorial development when their

human capital is optimized through entrepreneurship (Xheneti, 2006; Bönte et al.,

2009; European Commission, 2009; Hofer and Delaney, 2010; Liddle, 2011).

ere is empirical evidence of a positive relationship between youth entrepre-

neurship and territorial economic performance (Verheul and Van Stel, 2007).

According to White and Kenyon (2000), young entrepreneurs are innovating in

the organization of work, the generation and transfer of technology, and new

perspectives on the market. In certain circumstances, young entrepreneurs are

particularly responsive to new economic opportunities and trends (OECD, 2001).

One of the biggest competitive advantages that young people have in the knowl-

edge‐based economy is precisely their willingness to innovate (Lyngdoh, 2005).

1 JEL classication codes: J58, L26, L53.

Entrepreneurship generates

opportunities for professional

development, social and economic

integration, the maintenance of

the rural population, and the

attraction of new residents to

these territories.

Young entrepreneurs face more

than nancial constraints, as local

economic conditions and their risk

aversion are important barriers to

engage in entrepreneurial

activities.

To achieve greater rates of

entrepreneurship amongst rural

youths, policy should mold the

value system of the community in

general, and not exclusively that

of young adults.

188 Esteban Lafuente and Eduardo Gómez-Araujo

Copyright © 2016 John Wiley & Sons, Ltd. Strategic Change

DOI: 10.1002/jsc

Similarly, new communication technologies are indis-

pensable tools for competitiveness, and youths often have

a better grasp of these than their elders. A new culture of

work is emerging, and young entrepreneurs have the

capacity to be leaders in this new context (OECD, 2001).

From an academic perspective, most of the focus on

the determinants of territorial development has acknowl-

edged that a territory’s entrepreneurial activity contributes

signicantly to territorial economic performance, where

the active participation of youths within the economy is

found to play an especially important role (Naudé et al.,

2008). However, there is a dearth of comparative research

analyzing the economic contribution of young entrepre-

neurs against those of their older counterparts. Little is

known about the potential dierences across regions of

the contributions of youth entrepreneurial activity for

economic development. is is particularly striking given

the policy relevance that youths are gaining in Europe in

the context of the current economic downturn (European

Commission, 2009, 2012). Policy makers also highlight

the relevance of specic components linked to the terri-

tory’s entrepreneurial climate in fostering entrepreneur-

ship (European Commission, 2004). Yet, there is a lack

of research from a longitudinal perspective that simultane-

ously captures the dierentiated eect that certain ele-

ments of the territory’s entrepreneurial climate have on

the entrepreneurial activity of youths and non‐youths,

and the eect that this entrepreneurial activity has on

territorial economic performance.

erefore, we focus on young people, and the research

objective of this study is to determine whether a territory’s

youth entrepreneurship has a greater impact on its eco-

nomic performance than that of older entrepreneurs at

the territorial level in Spain. e study also strives to

identify the dynamics at work behind the expected rela-

tionship between youth entrepreneurship and territorial

economic performance.

e empirical application considers a unique dataset

of Spanish individuals for the period 2004–2008. e

analysis of youth entrepreneurship within Spain is

particularly attractive, since Spain is one of the OECD

countries with the highest proportion of business start‐ups

by young people (Coduras et al., 2012). Also, and putting

the current economic diculties aside, the gross domestic

product (GDP) of the Spanish economy between 1980

and 2008 grew consistently above that of Europe (OCDE,

2012). Finally, previous evidence points out that Spain’s

regions show important dierences in their entrepreneur-

ial activity, and this variation can be partly explained by

the dierent propensity toward an entrepreneurial career

across territories (Lafuente et al., 2007). is further sup-

ports the joint analysis of the relationships between ele-

ments linked to the entrepreneurial climate, youths’

entrepreneurial activity, and economic performance.

e remainder of the study is structured as follows.

e rst section presents the theoretical framework and

the development of the hypotheses. e second section

shows the data and methodology. e third section con-

tains a discussion of the main results, and a nal section

comments on the conclusions and implications.

Theoretical framework and hypotheses

Youth population in the territories

What can happen to a territory that runs out of young

people? Without a proper rejuvenation of a territory’s

population, its economy cannot remain viable or maintain

its long‐run socio‐economic functions (European Com-

mission, 2009; Headey and Hodge, 2009). Territories

without youths will not endogenously renew the labor

force and without immigration, economic activity will

diminish (ILO, 2010).

us, the proportion of young people is crucial to

maintain a stable economy (Van Groezen and Meijdam,

2004). In a population with few youths, the ratio of

retired people who generate dis‐savings to working people

who save for their retirement will be high, and hence the

aggregate saving rate will be reduced (Futucami and Naka-

jima, 2001). en, having a young population structure