Knowledge transfer: Comparing strengths, tracking trends

A new study, co-authored by UNU-MERIT, says that Europe outperforms the USA for new start-ups and licence agreements. However, Europe trails the USA for patent applications, licence income and invention disclosures. The European Knowledge Transfer Report 2013 draws on the most geographically diverse survey of knowledge transfer activities in Europe, covering more than 700 organizations in over 30 countries. Researcher Nordine Es-Sadki explains the approach, data and details below.

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Why India needs better skills and higher technology

There has been an impressive spurt in the outward foreign direct investment (FDI) activity of Indian Multinational Enterprises since the 1990s, says a recent working paper from UNU-MERIT. But despite the rhetoric, this growth has not been exceptional compared to other similarly developed countries, argues co-author Professor Rajneesh Narula. He recommends a policy emphasis on the manufacturing sector, and within that, promoting a shift from low-tech to higher technology. In answering the questions that follow, Rajneesh provides further details about his area of research and explains the significance of FDI in developing policy.

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‘Catching Up’ in the Caribbean: DEIP 2013

Mention the Caribbean and few people think of innovation. But the capacity to innovate is crucial to growth here, just as in many other developing regions around the world. Decision makers in Caribbean countries are now realizing that an effective Science, Technology and Innovation (STI) policy can galvanize large parts of their economies. Whether in agriculture, music or tourism, so much can be done: from helping entrepreneurs to clustering to upgrading value chains.

The creativity, desire and will are all there. What remains is to build capacity, first by sharing knowledge, then by applying new approaches to real-world needs. This was the mission background to UNU-MERIT’s latest ‘Design and Evaluation of Innovation Policies’ (DEIP) course. The June 2013 edition was an intensive one-week training course for more than 35 participants, co-organized by UNU-MERIT and the University of the West Indies (see below for an AV slideshow and six brief interviews with speakers and participants).

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Press Review June 2013: First Impressions

Our internal press review features the latest publications by UNU-MERIT and its School of Governance: from working papers to policy reports to entire books.

Our June output includes a handbook, a PhD thesis and nine working papers, covering half the globe from Canada through Latin America to Western Europe to Iran. We focus on topics including the impact of infrastructure on trade; child deprivation and poverty; location advantages for new multinationals; and microeconometrics for innovative activity.

Innovation for economic performance: The case of Latin American firms’ analysed a raft of indicators to capture the innovation behaviour of manufacturing firms in the Latin American and Caribbean (LAC) region. Using the Enterprise Surveys 2010, this working paper explored differences in innovation performance and effort by country, sector and firm characteristics, such as being a multinational or exporter. The authors identified top R&D performers in LAC and what features they share. By researcher Pluvia Zuniga, PhD fellow Ezequiel Tacsir, et al.

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Migration Debate: From Local Lives to Global Policies

Migrant entrepreneurs represent clear development potential for source countries. While abroad they gain new skills, earn more money, build social networks — and often bring these benefits ‘home’. But amid a divisive political climate, how should academics and policy makers approach this thorny issue? On 29 May 2013, the Maastricht Schools of Governance and Management held an International Policy Debate to clarify the links between remittances, entrepreneurship, and development. 

As a new research assistant at UNU-MERIT, I was lucky enough to sit in on last week’s policy debate. Having finished my bachelor’s a few weeks ago, I can say that I have read development and migration about as thoroughly as an undergraduate can. But I had never before seen it applied in real time.

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Bombs and Business: How can Entrepreneurs in Fragile States Manage the Risks of Violent Conflict?

The World Bank’s World Development Report 2014 will focus on ‘Managing Risk for Development’. As the Bank frames it in a concept note, “responsible and efficient risk management is crucial not only to reduce the negative impacts of shocks and hazards but also to enable individuals, households, and entrepreneurs to pursue new opportunities for growth and prosperity”.

The recognition of entrepreneurs as a category of agents, whose decisions are influenced by shocks and hazards, is part of a growing recognition of the role, both positive and negative, of entrepreneurs in development – see for instance my 2010 overview paper in the Small Business Economics Journal. One particular risk that entrepreneurs face in most fragile states is that of violent conflict. How can entrepreneurs manage the risk and impacts of violent conflict?

 

 

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Pink Slippers and Platinum: Governance Failure and the Decline of Innovation and Entrepreneurship in South Africa

South Africa’s national defence force was once perhaps highly rated; recently it is facing ridicule and concern. Ridicule, as a Lieutenant-Colonel was seen sporting pink slippers with her official uniform in public. According to the UK’s Guardian Newspaper, “It is not an image of top guns defending African skies that is likely to deter would-be foreign invaders”. Concern, as an officer borrowed an air force plane for personal use to visit a friend in neighbouring Botswana.

South Africa’s platinum mines were also once highly rated. Until the Marikana Massacre of 16 August 2012 when the South African Police killed 34 striking workers, apparently shooting many in the back, interfering with evidence after the shootings, and charging the mine workers (the victims) with the deaths of their fellows. While it is the police, and not the mines that are now facing an inquiry, the context of South African mining remains problematic, despite a decade of the longest commodity boom in recent history.

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The Blue Economy: The Only Sustainable Option?

It’s no secret that our Earth is moving towards an environmental catastrophe. Many of us try to effect change locally in our own communities, but more powerful forces are at work. Forces that put economic gain before the health of our planet.

Let’s not lie to ourselves: this Aggressive consumerismbeautiful planet of ours is run by the forces of the market economy. Any business student can blurt out the mantra: you have to compete in the global market, produce at the lowest marginal cost, sell at the maximum possible price, focus on core competences, seek economies of scale, and destroy competitors.

The Chicago School of Economics convinced us that the government should not interfere in this perfect dance of the market. Later, marketing geniuses invented the concepts of Corporate Social Responsibility and the triple bottom line in full cost accounting; all to sell the idea that even a company which destroys moorland and forest reserves can also be good, so long as they give a little to charity.

What’s the end result of these decades of ‘economic growth’? Millions of people leaving their rural communities and moving to city slums, mass unemployment (from Colombia to Morocco), an inequity that hits us daily at every traffic light, a cult of consumerism that has created unprecedented debt, and record-breaking destruction of our natural resources. Are there still people who think this system is working?

There is, however, a new economic model breaking ground in our globalized world: the Blue Economy. Apart from proposing a radical break with the green movement, it provides a completely different perspective on the struggle for sustainability.The great green paradox declares that what is good for us and the environment is very expensive, while what is bad for us and our environment is cheap (think about sodas vs. natural juices).

Under the Blue Economy model, the idea is not to try to reduce or solve pollution after the ecological damage has been done. On the contrary, it aims to redefine the concept of waste via a self-sufficient and dynamic approach. It also aims to prevent the use of materials which can only be used once, including oil.

We’ve already seen many successes from the Blue Economy. From using coffee grounds to grow mushrooms at home (remember that in our morning cup of coffee we use only 0.2% of the actual product); to using hot water, which is normally wasted in beer production, for fish farming; to large crops of algae fed with carbon dioxide, already being generated in megafactories. Experts say this algae could become the ‘super-food’ of the future, thanks to its high content of spirulina (a nutritious high-protein food supplement).

The Blue Economy is based on the power of entrepreneurship and local creativity. It seeks to break the rules we have given the system of global competition, to convert industries considered non-competitive by the standards of the market economy into viable models which preserve our world. This involves the creation of new systems made from existing
resources in our local communities. By changing our concept of waste and resource use as complementary processes, it aims to generate multiple revenue streams which can ensure a low price for what is good, and to deliver what is vital, as free.

I had the opportunity to meet the leader of this movement during a recent trip to Hungary. Although born in Belgium and living in South Africa, this entrepreneurial genius is close to Colombia through some family ties and his work at the world famous Gaviotas Experimental Centre. Find out more about Gunter Pauli and his foundation, sponsored by the United Nations University Institute of Advanced Studies (UNU-IAS) in Tokyo, at www.zeri.org

by Carlos Cadena Gaitán, PhD fellow at Maastricht Graduate School of Governance and UNU-MERIT. First published in El Mundo, 16 July 2012. Image: Flickr / Burtonwood & Holmes. Translated from the Spanish by Howard Hudson.

Inaugural Lecture of Luc Soete: New Rector Magnificus of Maastricht University

On 29 June 2012, the outgoing Rector Magnificus of Maastricht University, Professor Gerard Mols, handed over the rectorship to his successor, Professor Luc Soete. The ceremony took place before the entire academic community in Sint Janskerk, the historic red tower at the centre of the city. Professor Soete spoke of the long academic history of Maastricht dating back to the 17th century, and the bright future of ‘Maastricht Univer-City’ in terms of higher rankings and further internationalization. Below is the full text of his lecture.

Rectores Magnifici[1], Rectores Normali from elsewhere in Europe,
Dear Colleagues and other ‘Éminences Grises’,
Ladies and Gentlemen,

The last time I stood here at this pulpit in this historic church of Sint-Jan (Saint-John) was in 1990, on 12 January 1990 to be precise. From up here it looks pretty much the same…

The title of the ‘Dies Natalis’ lecture which I gave from this very same place was ‘The future isn’t what it used to be: a forward looking exploration of internationalisation Anno 1990’, written on the threshold of what appeared a new time. The future isn’t what it used to be seemed to me then an appropriate title because at the beginning of that last decade of the previous century, the future of our Western European world seemed suddenly, after the fall of the wall in Berlin, totally different. Optimism was in the air, and so it was also with me.Gerard Mols hands over to Luc Soete

Now in these scary European times, let me quote from this 1990 lecture: “At amoment that everybody in Europe, sorry Western Europe, is talking about the opening of the borders in 1992, the real borders in Europe, those with barbed wire, watch towers and border guards, are opening three years earlier. The information flyers from the European Community which try to convince people that the borders – whichborders most citizens wonder? – will be opened in 1992, appear perfectly fit for distribution in East-Germany, Poland, Czechoslovakia, Hungary, Bulgaria and Romania.”

It was at that time also the ‘Dies Natalis’ lecture of the then State University ofLimburg (the RL: ‘Rijksuniversiteit Limburg’): a relatively new, small provincial university with about 5000 students including 23 Belgian and 35 German students. I proposed that the university would continue to expand to become an international Limburg university with two sites, two ‘campi’: one in  Diepenbeek/Hasselt in Belgium and ours here in Maastricht, and subsequently that the university would intensify its Euro-regional cooperation with Aachen and Liège following the example of the Confederation of the ‘Oberrheinischen Universitäten’ in which the five universities of Strasbourg, Mulhouse, Karlsruhe, Freiburg and Basel participated, now known as Eucor. It is neither the place nor the moment to elaborate here on what was and whatwasn’t achieved from all this over these last 22 years.

If I were to give a Dies Natalis lecture here today anno 2012, I would choose, and with a wink to our colleagues in Aachen, the title: ‘Maastricht Univercity’. In English of course, and Univercity written with a c in place of an s.

Maastricht Univer-city. But let me reassure you immediately, I’m not going to do this here.

It is nevertheless striking to see how the long-term future of this historic city is today first and foremost one of a truly university town, by which I do not want to narrow down the university part to the University of Maastricht but also to include the Maastricht University Medical Centre (MUMC+), the Zuyd University of Applied Sciences (Hogeschool Zuyd) and many other national and international knowledge institutions located in Maastricht, including the European Institute of Public Administration, the European Centre for Development Policy Management, the Maastricht School of Management, the United World College and of course my own United Nations University institute UNU-MERIT. Together they form the core of ‘Maastricht Univer-city’.

In these days of financial uncertainty, increasingly empty office spaces and retail outlets in the inner city, a sustainable future of Maastricht can no longer be viewed separately from its international knowledge and higher education institutions and the presence of its large international student and staff population. For Maastricht this is also nothing new. Maybe surprising to many of you, Maastricht has always been a university city. A history refresher[2].

The official Rector transmission as it occurs here today actually has a long history. Here, at this very pulpit of St. Jan’s Church, the Rector of the Illustrious School (the so-called ‘Schola Illustris’) in Maastricht has opened the academic year since 1683. Here too the professors of the School have given their inaugural lectures. In the archives of the Centre Céramique library one can find examples of these speeches.

And just as in the case of the University of Amsterdam, where the ‘Athenaeum Illustre’ located in the Agnietenkapel may be regarded as the foundation of the Universitygoing back to 8 January 1632, the Illustrious School of Maastricht may also be regarded as the precursor of Maastricht University. In Amsterdam though, legal recognition of the Athenaeum Illustrious as an institution of higher education: the University of Amsterdam, was given in 1815.

In Maastricht, King Willem I invited the City Council of Maastricht in 1817 to transform the Illustrious School into a University of Maastricht. Unfortunately, the city decided against it, because of a lack of resources. So eventually, King Willem I proposed to create a university in Liège[3] and not in Maastricht…. But who knows, if Maastricht had created its university back in 1817, the city might well have become lost to the Netherlands following the Belgian Revolution in 1830.

It is therefore in many ways remarkable that I, as a new Belgian Rector of Maastricht University, stand here before you. My only Belgian predecessor seems to be a certain Joost Lips[4], also from the Brussels area, who made it to become Rector Magnificus of Leiden University four times. But for that we have to go back to 1575.

But these were of course other times, maybe not so much with respect to the international background of teachers and students but in terms of the sheer numbers of students and staff involved. The explosion of higher education activities in Maastricht over the past decades, or if you prefer the past centuries, is what characterizes Maastricht Univer-city today. A growth which seems at first sight insatiable and is likely to continue into the future.

To give you a concrete example: for a study which is today subject to a limited student enrolment (a ‘numerus fixus’) such as the Bachelor programme in Business and Economics, we have to date some 3162 students registered for the next academic year, for a total of only 1050 places; for the 200 places available in the University College Maastricht we have more than 700 students requests.

Some 30 years ago, Howard Rothmann Bowen, an American education economist, who gained direct insights from his own experience as president of three different American colleges, formulated the ‘law of Bowen’, an economic higher education law which looks at first sight like all those typical economists’ tautologies: the costs of higher education are determined by available resources[5]. But upon reflection, it becomes a more interesting proposition. For Bowen’s law explains well why American colleges and universities have competed first and foremost on reputation and prestige over the last 30 years since Bowen wrote his law, rather than on the basis of quality and price.

In the US in particular the main ‘competitive’ incentive for universities seems to have been to raise tuition fees as much as possible[6]. Nowadays Bowen’s law appears also as the basis of a more global reputation race in higher education with the widespread national and international rankings of universities acting as a sort of information accelerator. The effect is increasing conformity and imitation behaviour between higher education institutions[7].

Last month, for the first time, unlike the traditional aggregated university rankings such as the Shanghai Jiao Tong University and the Times Higher Education Supplement, a disaggregated ranking of universities was presented for about 250 different (sub-)disciplines, partly in collaboration with UNU-MERIT’s sister organization in Macao, UNU-IIST. Interesting to read. Why? Well because it illustrates neatly that, as could be expected, the US top Ivy League universities and the English Oxford and Cambridge universities – the top universities in the Shanghai and THE rankings – also lead the world in virtually all (sub-)disciplines.

But also, and more interestingly, many European universities rank amongst the world top in various specialized discipline areas. In other words, contrary to the impression of total world domination in research of the US Ivy League and Oxbridge, many European universities appear to have a ‘smart’ specialization research pattern in various areas where they belong at the absolute top of the world. Something whichisn’t picked up in aggregate national or international ranking system of universities.

From this perspective, the apparent lack of world class reputation of European universities, as often argued by European politicians on the basis of the absence of European universities in the world top 50 of aggregate university rankings, maybe even something that should be applauded. It might well have avoided the kind of reputation race that keeps American higher education institutions today in its grip, following Bowen’s law, with a tendency to increase continuously tuition fees (estimates range from 440% over the last 25 years for some of the most prestigiousinstitutions) without any major increase in educational quality or impact. And it might have led European universities to specialize in particular scientific areas, attracting world class researchers, less obsessed with and influenced by the aggregate (inter-)national reputation of their university.

But back to Maastricht: the first official transmission of a Rectorship here in St Jan’schurch took place some 300 years ago, in 1715 to be precise as part of the transmission of the Rectorship of the Schola Illustris of Professor du Rondel to Professor Leverickvelt. Du Rondel was appointed in 1683. A Rectorship was occupied on average 33 years…

This brings me naturally to the exceptional Rectorship of Gerard Mols. Eight years and eight months, most of you have never known anybody else as their Rector Magnificus than Gerard Mols. A Rectorship which by the way is also not over but will last until late August. So this celebration today comes much too early…

Originally I thought that the Executive Board of the University had decided to organize this Rectorship transmission on this Friday 29 June because it was expected that the following Sunday, there would be the final of the UEFA EURO 2012 footballchampionship in Kiev between Germany and the Netherlands. With a German chairman of the Executive Board of the university and two Deans with a German background, there might have been a need for a neutral figure in order to intervene in cases of possible tensions within the institution. And what would be more neutral than a Belgian Rector Magnificus, for sure not an Italian one!

In short, I thought this Rector transmission had been organized as a kind of emergency regulation. On Monday I would then go back to Gerard Mols office on the Minderbroedersberg and hand him over this Rector necklace. But as we have all noticed even in football… the future Isn’t what it used to be! Now I can, once I have left this pulpit, hand over back to Gerard Mols this heavy necklace. I will have been your new Rector Magnificus for a couple of minutes.

[8]Let me use the last minutes left wearing this necklace, to prepare you for the loss of a beloved and respected Rector Magnificus who brought Maastricht University so much over the last eight years and six months. What I have appreciated most in Gerard and in my Rector Magnificus is his ability to put things into perspective, to ‘relativize’ as we say in pidgin English and Dutch. Perhaps because Gerard always stayed with one foot in the real world as substitute judge or as a home gardener and sheep keeper, but it’s something I’ve always admired.

I will never forget how I, sorrowfully, phoned Gerard once and after a conversation of less than two minutes that consisted mainly of Gerard’s booming laugh, looked again completely relaxed towards Maastricht University life. To ‘relativize’: a real art for a Rector Magnificus.

Now that I will take over the baton from Gerard in a couple of months as Rector Magnificus, I realize that my way of putting things in perspective consisted primarily of writing newspaper columns in the local newspaper. Now that I’m not yet Rector Magnificus, let me quote briefly from one of them in which I discussed managing a university. “I think that managing a university can be best compared with managing a zoo. You have a variety of exotic animals in your place – the professors – each with very specific characteristics. Some are rather peaceful, even cute and have a high level of cuddliness. Others are more skittish and prefer to remain in their academic loft. And others are more dangerous, sometimes very dangerous. When visitors – for example, potential donors, colleagues, business leaders, politicians – come over, you should be well aware of the different characteristics of your inhabitants. In case of the last ‘dangerous’ category, which considers visitors first and foremost as prey, you should allow them to show their tricks in a secured environment; in other cases, on the contrary you should encourage physical contact. Managing a zoo is an extremely complex business: your inhabitants have very different needs and preferences: some you can put together in the same garden or building – a department, a faculty – others you better leave alone. Logistics is also very complex: they have often totally different dietary needs and you’ll have to find the right people to escort them – managers, directors – taking care of their needs yet while also not being eaten by them. And the visiting public – your students – will come all the more if you have exotic species. Occasionally you might have some who will have their picture in the local news and that of course attracts more public.”

My inspiration for this piece[9] came undoubtedly from the time I worked at Antwerp University during the 1970’s and passed Antwerp zoo every day in the train. But Maastricht University staff don’t worry, I stopped earlier this year, in preparation for this Rectorship, writing columns in the local newspaper.

Dear Gerard, you are about to leave us to go on a sabbatical, but fortunately you will not leave us completely because even during the sabbatical you will help us in the institution’s forthcoming accreditation and you will be the director of TMFI, The Maastricht Forensic Institute at Maastricht University. Managing a university institute is very different from managing a university; I would argue drawing from my own experience as director of a university institute for now nearly 25 years.

To put it in an equally exotic comparative way to the previous example with respect to the university and the zoo, I would suggest that managing a university research institute might be best compared with sending out a medical team into a disaster area.  

And let me again quote from one of those own newspaper columns: “First quickly select between the severely wounded and half dead, the wounded who are still somewhat mobile but might need crutches and bandages and finally the others. The last category you send immediately back into the battlefield. Give them supplies to the end of the academic year and your job is basically done. Next year they may come back to report. The more you try to manage them, the more you get in their way. With the second group you should neither be too much occupied: the primary need here is encouragement, here and there replace some bandages, providing a crutch or walking sticks or other appropriate instrument – a new laptop, or these days an i-pad and there they go. In fact, you must spend all your time with the first group. Stay and sympathize with them, hold their hands till they say farewell to university life or where possible, resuscitate them.” Dear Gerard, as you can see, and certainly in case of this task, your quality to relativize as Rector Magnificus will come in very handy here. I wish you all the best…

Before descending from this pulpit in this gown with this heavy necklace around the neck, let me thank all members of the Maastricht University community, students as well as the members of the Supervisory Board for the trust and confidence they have placed in me. I look forward to September and the new exciting challenge in my life of becoming your new Rector Magnificus.

Thank you all.”

Luc Soete, 29 June 2012

 


[1] Inaugural lecture of Professor dr. Luc Soete at Sint-Jan’s church in Maastricht on 29 June 2012 on the occasion of the transmission of the Rectorship of Maastricht University.

[2] With particular thanks to my colleague Professor Emeritus Harry Hillen who passed me most of these facts, See also the book Maastricht Kennisstad; 850 Jaar Onderwijs en Wetenschap in Portretten, published in 2010 and the article of Hillen, H. (2010), Eerste hoogleraar geneeskunde Maastricht: Pelerin, Ned Tijdschr Geneeskd. ;154:A1525

[3] If Bernard Rentier, the Rector of the Université de Liège would be here, I’m sure he would immediately insist that, thanks to the reputation of the medieval schools in Liège, the city had a renowned reputation as the ‘Athens of the North’ going back much further with the Collège which opened in 1496 and the secular Prince-Bishop Velbruck transforming the College of English Jesuits (established in Liège in 1614) into the English Academy which promoted high quality technical education.  The Academia Leodiensis was officially established by Willem I on 25 September 1817.

[4] In those days, one usually ‘Latinized’ first and family names. Joost Lips was the Dutch name of Justus Lipsius.

[5] More precisely: “at any given time, the unit cost of education is determined by the amount of revenues currently available for education relative to enrollment. The statement… expresses the fundamental fact that unit cost is determined by hard dollars of revenue and only indirectly and distantly by considerations of need, technology, efficiency, and market wages and prices.” (p. 19), Bowen, H. (1980), The Costs of Higher Education.

[6] Today Bowen’s Law is actually well accepted by many higher education economics. Following Bowen’s law, one may argue that most colleges lack any incentive to keep costs down in order e.g. to keep tuition fees down.  As Bowen put it: “The question of what ought higher education to cost—what is the minimal amount needed to provide services of acceptable quality—does not enter the process except as it is imposed from the outside. The higher educational system itself provides no guidance of a kind that weighs costs and benefits in terms of the public interest. The duty of setting limits thus falls, by default, upon those who provide the money, mostly legislators and students and their families.”

[7] A point made explicitly by the former Rector Magnificus of Twente, now chairperson of the recent ‘Review Commission’ of Dutch universities, Professor Frans van Vught (2008), Mission Diversity and Reputation in Higher Education, Higher Education Policy, 21, 151–174.

[8] These paragraphs in grey were not pronounced because of lack of time.

[9] Translated from Soete, L. (2010), Universitaire managementwijsheden, Dagblad De Limburger, 13 novermber 2010 (http://www.soete.nl/ddl/ddl201011.html) . I owe a particular debt to Paul David reflections and thoughts in writing this piece after one of those great social dinner evenings with him in Maastricht.

Happiness and Entrepreneurship: New Research Insights

Unemployed? Frustrated in your job? Can’t stand your boss? Then you may want to start your own business. You will not earn as much as you would have in your old job (assuming you had one); you will work much longer hours; you will face hassles with banks, tax authorities, officials and fickle customers; cut-throat competition may cause you bodily harm.

Don’t despair – on UN Photo / Evan Schneiderthe contrary, starting your own business is likely to make you a happier person. That is one of the salient facts from the scientific literature that emerged from a recent workshop on Happiness and Entrepreneurship organized by UNU-MERIT and the School of Governance in partnership with the Maastricht School of Management, ERIM and Erasmus University of Rotterdam and held in Rotterdam on 13 April 2012.

In a paper titled ‘Life satisfaction and self-employment: a matching approach‘ Alex Coad and Martin Binder showed, using a 10-year panel dataset from the UK, that entrepreneurs (the self-employed) enjoyed significantly higher life satisfaction than people who were in wage employment. “In our analysis we found that individuals moving from regular employment into self-employment … experience a positive and significant increase in life satisfaction, that actually increases from the first year of self-employment to the second”.

Although they are laughing, entrepreneurs are not laughing all the way to the bank because the average earnings of self-employed persons in UK are lower than that of salaried employees. Their average earnings are for instance much less than the earnings of bankers. It means the non-pecuniary benefits of being an entrepreneur compensate for the downsides mentioned.

What do these non-pecuniary benefits entail? It is the type of work that entrepreneurs do that matters. In a paper on ‘Determinants of job satisfaction: a European comparison of self-employed and paid employees‘, José María Millán and co-authors confirm that entrepreneurs enjoy greater job satisfaction in terms of work than salaried employees: “Self-employment has advantages in providing autonomy as compared to paid employment. Self-employed individuals are in charge and therefore capable of (re)defining their work, suggesting that introducing entrepreneurial aspects (i.e. autonomy, independence, etc.) to paid employed jobs may help to increase the job satisfaction of paid employees with their respective type of work”.

Starting your own business can therefore make you happier. It will make you even happier if you employ people. Moreover, there is a positive correlation between how entrepreneurial a society is and its national level of happiness. Consider the following graph, taken from a paper I co-authored with José Ernesto Amorós and Oscar Cristi and presented at the workshop: it clearly shows that countries that score well in terms of Global Entrepreneurship Development Index (GEDI) also score well in terms of happiness. The causality is likely to be bi-directional (Click to enlarge).

Naudé, Amorós & Cristi, 2012a

There are two caveats to the above. First, the results refer to the entrepreneurs and the employed on average. Entrepreneurs are a heterogeneous group. Joachim Merz and Tim Rathjen presented a paper based on the German Socio-Economic Panel that finds that even though poor entrepreneurs may earn incomes above the (income) poverty line, they are often still poor in other dimensions of wellbeing, such as time – i.e. entrepreneurs are often ‘time-poor’ compared to the employed.

Second, economic cycles impact negatively on entrepreneurs’ happiness. In their paper José María Millán and co-authors find that although entrepreneurs are more satisfied with their jobs in terms of the type of work they do, they tend to be less satisfied with respect to the security it affords. This may be particularly troublesome during economic downswings, such as during the current economic malaise in Western economies.

According to the Flickr / Adam CohnInternational Herald Tribune there has been a significant rise in suicides amongst entrepreneurs in European countries most affected by the economic crisis, particularly where social protection measures have been eroded by the fiscal austerity pandemic: “in the most fragile nations like Greece, Ireland and Italy, small-business owners and entrepreneurs are increasingly taking their own lives in a phenomenon some European newspapers have started calling ‘suicide by economic crisis’”.

For increasing national happiness the policy prescriptions for labour market reform and human resource management are clear: employees should be treated more like entrepreneurs; and entrepreneurs more like employees.

by Wim Naudé, Professorial Fellow at UNU-MERIT and the Maastricht Graduate School of Governance. Images: UN Photo / Evan Schneider; Naudé, Amorós & Cristi, 2012; Flickr / Adam Cohn