A Framework for
by Nadim Ahmad and Anders Hoffman
Entrepreneurship Indicators Steering Group
Paris, 20 November 2007
A Framework for Addressing and Measuring Entrepreneurship
Nadim Ahmad and Anders Hoffman1.2
The recognition that entrepreneurship and entrepreneurs are important drivers of economic
growth, employment, innovation and productivity has been long understood by analysts and
economic theoreticians. Indeed, it dates back centuries if one considers the work of Cantillon,
the first academic to explicitly attempt to define, and describe the role of, entrepreneurs. It
was however not until the 1990s that the term ―entrepreneurship‖ became a buzzword both in
the media and in political debate. Newspapers were full of success stories about self-made
billionaires and politicians wanted to support and encourage their endeavours more widely.
This recognition has accelerated since the mid-1990s, with policy makers in many countries
and international organisations beginning to explicitly recognise the importance of
entrepreneurship and making general statements about their commitment to increasing
entrepreneurship or, at least, to improving the entrepreneurial environment (Lundström and
Stevenson, 2005, Hart, 2003; OECD, 2007a), by developing policies to improve the
entrepreneurial environment, whether by removing obstacles or via more direct targeted
actions such as subsidies for example.
However, the pursuit and development of these policies, namely the factors that affect and
benefits of, entrepreneurship, are still hampered by the limited, albeit growing, empirical
information relating to these factors and benefits. Where there are policy references to
entrepreneurship, most simply equate it with small and medium sized enterprises (SMEs) in
general, or even numbers of self-employed (Hoffmann, 2007). Neither of which fully captures
the totality of entrepreneurship, as we show later.
This, in part, reflects the greater availability of statistics on SMEs and the self-employed but it
also reflects the general ambiguity relating to entrepreneurship. What compounds this
ambiguity is the need for policy makers, particularly those in Europe, to be able to make
international comparisons of entrepreneurship. In the absence of definitions that capture the
essence of entrepreneurship therefore, and entrepreneurship indicators that are internationally
comparable, policy makers are left somewhat rudderless when it comes to developing
policies, particularly when they relate to learning from international best-practice.
1 Nadim Ahmad, Statistics Directorate, OECD, Email: email@example.com, and Anders N. Hoffmann,
PhD Creative Director, FORA, Danish Enterprise and Construction Authority, Division for Research and
Analysis, Email: firstname.lastname@example.org Website: www.foranet.dk
2 The authors wish to thank all members of the OECD Steering Group on the Entrepreneurship Indicator Project
for comments and inspiring discussions.
However, that said, even in the absence of an internationally accepted and comparable
definition of entrepreneurship, the situation regarding the availability of indicators has begun
to improve in recent years.
Many countries now recognise entrepreneurship policy as a separate discipline and, as a
consequence, have taken steps to improve the measurement of entrepreneurship at the national
level. At an international level, programs by the World Bank, Eurostat and private
organisations such as the Global Entrepreneurship Monitor, have also started to develop
internationally comparable data. But it is fair to say that very few, probably none, of these
efforts capture or embody entrepreneurship, neither conceptually, nor empirically, in a
comprehensive manner, and, in fairness, none explicitly claim to, since all recognise that
entrepreneurship is a multi-faceted phenomenon of which they measure one or some aspects.
Moreover, it is important to note that developments at the national level rarely provide for
2. The Entrepreneurship Measurement Framework
These shortcomings and the growing importance of entrepreneurship in the policy domain
have magnified the need for a sounder basis for internationally comparable indicators of
entrepreneurship and, indeed, for an internationally accepted measure of entrepreneurship that
facilitates and forms the basis of these measures. But the measures, and so the framework,
need to be able to provide information not only on how many entrepreneurs there are or the
level of entrepreneurship, say, but they also need to be able to provide information on
indicators that determine these levels, and, ideally, an indication of the impact that these
levels have in meeting specific policy targets; since creating a more entrepreneurial economy
or more entrepreneurs say, is merely a means to some bigger end, and not the end in and of
Given its experience in international data development, many countries and groups turned to
the OECD for assistance and guidance in developing such a framework by capitalising on its
international networks of statisticians, analysts and policy makers. The OECD 2004 Istanbul
Ministerial Conference on SMEs and Entrepreneurship made strong and explicit
recommendations on the needs for, and development of, more comprehensive and comparable
data. In 2005/06, the Kauffman Foundation of the United States approached the OECD to
undertake a Scoping Study to determine the feasibility of developing high quality, comparable
international data on entrepreneurship and its determinants. In addition, ICE, a Danish-led
international consortium, has also provided funding for various specific data development
These initiatives and requests led the OECD to create an Entrepreneurship Indicators
Programme (EIP)3 that has been at the vanguard of investigations and developments that seek
to improve our current understanding and measurement of entrepreneurship. The work of the
EIP continues but the cornerstone of its activities is the development of the framework
presented in this paper and indeed the ability to marshal and motivate resources from across
3 For more information on the EIP including feasibility studies and meetings that have been instrumental in the
development of the framework, see www.oecd.org/statistics/entrepreneurshipindicators .
statistical institutions, ministries and research institutes, as well as within the OECD, to
engage in the framework‘s crystallisation.
Clearly, the development of such a framework is a formidable challenge. Entrepreneurship is
after all a phenomenon that manifests itself throughout the economy in many different forms
with many different outcomes, and these outcomes are not always related to the creation of
financial wealth, for example they may be related to increasing employment, tackling
inequalities, or indeed, increasingly, environmental issues.
The challenge therefore is to develop a framework that provides the means to tackle these
diverse outcomes and manifestations whilst at the same time remaining focused on the
measurement of entrepreneurship. Key to this is, is a definition that captures the essence of
entrepreneurship, one that is able to encompass these diverse issues, whilst at the same time
remaining focused and most importantly measureable.
The OECD definition (OECD, 2007b) is described below. Its focus is deliberately to target
business related entrepreneurship, and, so, explicitly ignores social entrepreneurship. That is
not to undermine the importance of social entrepreneurship4, merely to say that the definition
sets out to capture a particular aspect of entrepreneurship related specifically to businesses,
since the interests of the OECD and the bodies that have been participating and supporting the
OECD in this work are in this domain.
The definition considers three components: Entrepreneurs, Entrepreneurial Activity and
o Entrepreneurs are those persons (business owners) who seek to generate value,
through the creation or expansion of economic activity, by identifying and exploiting
new products, processes or markets.
o Entrepreneurial activity is the enterprising human action in pursuit of the generation
of value, through the creation or expansion of economic activity, by identifying and
exploiting new products, processes or markets.
o Entrepreneurship is the phenomenon associated with entrepreneurial activity.
More information on the rationale for the definitions can be found in the paper cited above but
for the current paper, it is sufficient and instructive to mention a few points.
The first relates to an important distinction between Entrepreneurs and
Entrepreneurial Activity. Where there are entrepreneurs, there will always be
entrepreneurial activity but it is important to note that the latter is not dependent on the
existence of the former. This is important because the OECD definition recognises
that individuals within businesses may demonstrate entrepreneurship without
necessarily having a stake in the company. This means that all companies, even those
without an entrepreneur at their helm, can be entrepreneurial. Companies owned by
shareholders or trust funds for example and managed/run by salaried directors can still
be entrepreneurial and the way they operate their businesses in identifying and
4 Indeed the measurement of social entrepreneurship brings many new conceptual and practical difficulties to the
table, chief amongst these being data availability, which is much scarcer than data relating to businesses.
exploiting new products, processes or markets can be of benefit to other businesses
owned and managed by entrepreneurs.
The second point, which follows from the first, is that entrepreneurs and
entrepreneurship are not concepts that relate exclusively to small businesses or the
self-employed, as many studies, through expedience, have often assumed. The OECD
view is that entrepreneurship as a definable phenomenon reflects certain
characteristics that relate to the processes through which it is manifested, namely, the
creation of value through the identification and exploitation of new products,
processes, and markets and this is not uniquely the preserve of small companies or
entrepreneurs, important though these are to the entrepreneurial process. Moreover, it
is important to avoid a definition that is possibly counter-productive from a policy
perspective. Clearly, large companies can be entrepreneurial and it is important that
these companies are not ignored when formulating entrepreneurship policies.
The third ties entrepreneurship very closely to the idea that there is something
different about entrepreneurial businesses that sets them apart from other businesses;
namely they‘re in the business of doing something new, whether that be by
creating/identifying new processes, products or markets. Not all businesses are
entrepreneurial, indeed not even all new businesses are necessarily entrepreneurial
(which has important consequences for the framework and supporting indicators we
develop below and how they should be interpreted).
The fourth hinges very much on the ‗seeking‘. Many studies of entrepreneurship
investigate and focus only on those entrepreneurs or entrepreneurial businesses that
succeed. Failure is a very important part of the entrepreneurial process and much can
be learned from understanding it. Entrepreneurs who failed were still entrepreneurial
and, indeed, entrepreneurs.
The final point concerns ‗value‘. Policy makers are interested in facilitating or
encouraging the growth of entrepreneurship because it is recognised as a force for
good. How this ‗good‘ is achieved, indeed, determining what is ‗good‘ is the role of
the policy maker. These ‗goods‘ or objectives are about creating value in one domain
or another, and, as noted above, these can be very diverse. Therefore, ‗value‘ covers
both monetary and non-monetary returns. These values are, naturally, identified as
objectives or targets by policy makers, who will then develop policies designed to
achieve these targets although clearly they are carried out by entrepreneurs and
entrepreneurial firms. Some countries for example will focus on entrepreneurship‘s
contribution to economic growth. Other countries however might focus on
entrepreneurship‘s contribution to solving environmental problems or its contribution
to social inclusion.
Given the diversity of outcomes and manifestations, it stands to reason that no single indicator
can ever adequately cover entrepreneurship, especially given the different objectives. Indeed
the same holds true for the number of entrepreneurs. True, one could arrive at a single
indicator reflecting the numbers of persons that satisfy the necessary criteria, in the same way,
for example, that one can provide an indicator describing the number of innovative firms, but
this single indicator will not be able to reveal the full picture. Some of these entrepreneurs, for
example, will have limited growth potential, (reflecting the value embodied in their idea, or
their own attributes/experiences and motivation, for example push versus pull entrepreneurs).
Others, for example, will have enormous growth potential that can be measured both ex ante
and ex poste.
One could argue that one could measure entrepreneurship ex poste, in much the same way
that one can measure GDP ex poste but this is too simplistic and overlooks the fact that the
outcomes, or impacts, of entrepreneurship can manifest themselves in different ways that are
not additive, for example, job creation and (GDP) related value-added. As such, it is obvious
that the framework needs to be the vehicle that provides policy makers with the tools (in this
case, indicators) needed to tackle whichever entrepreneurship related objective they
determine. This reflects not only the measurement of any particular target indicator, for
example, the number of firms producing new products, but also the factors that determine or
influence these target measures.
The framework (Figure 1) therefore identifies three separate but inter-connected flows, all of
which are important in the formulation, assessment and appraisal of policy measures:
‗determinants‘, ‗entrepreneurial performance’, and ‘impact’, where: ‗determinants’ reflects
the key factors that affect ‗entrepreneurial performance’; ‗entrepreneurial performance’
reflects the target indictors that policy makers believe have an impact on some or many
ultimate objectives (impacts). Each of these is described in more detail below.
For simplicity however, and to assist interpretation, the basic idea behind the Conceptual
Framework can be illustrated by means of an analogy. Passengers want to get from A to B by
time t (reflecting the policy objective, Impact). There are various means of transport available,
some more costly than others, with each means having many variants, (engine size, fuel
consumption etc, which collectively form the Determinants). During the journey, passengers
are informed whether they are heading in the right direction and on time via speedometers and
GPS readings, (the Performance indicators). Different passengers (policy makers) will, of
course, want to go to different places and get there at different times (different Impacts),
using, whether by design or necessity, a mode of transport (Determinant) that reflects the
price they‘re willing to pay for a certain level of comfort.
Figure 1: The OECD/EUROSTAT framework for Entrepreneurship Indicators
In terms of understanding the evolution of the database it‘s perhaps easier to consider the
development from a top-down approach, that is, by considering the ultimate goals of policy
makers vis-à-vis entrepreneurship policy, drawing, of course, on the collective knowledge
gained from the many empirical studies that have investigated the ‗impacts‘ of
entrepreneurship in recent decades.
Impacts therefore reflect the ‗value’ created by entrepreneurs and entrepreneurship. As noted
above this value can be manifested in a number of ways, for example a macroeconomic
variable like GDP growth or employment, or indeed some other measure such as Gini
coefficients reflecting income distributions.
Entrepreneurial performance measures the entrepreneurial actions that are instrumental in
delivering the impacts. Given the multitude of possible impacts, it follows that there is also a
multitude of entrepreneurial indicators. Different countries will therefore choose to focus on
different indicators of performance depending on their policy objective (the value they wish
What we can say about the links between the performance measures and impacts however is,
of course, based on prior analyses that have demonstrated these links. Naturally, it is expected
that the creation and application of this framework across national statistical offices will
improve our understanding of the role that various aspects of entrepreneurship play in
delivering these impacts, and indeed provide a comparable basis that facilitates the production
of international analyses and comparisons.
The indicators included within ―entrepreneurial performance‖, and developed by the OECD
EIP and its partners comprise, therefore, a basket of indicators that are generally thought to
reflect entrepreneurship, and, indeed, that fit within the definitions outlined by the OECD.
The indicators themselves are not revolutionary, but what is arguably revolutionary is the
framework, which brings them together for the first time and provides an important and
unique rationale for their collection across countries. Indeed, many of the indicators will be
produced for the first time in many countries.
A myriad of underlying environmental and sociological factors coupled with the personal
attributes of entrepreneurs affect the outcomes of the entrepreneurial process. All of these
factors and attributes are expressed in the determinants for entrepreneurship.
The model recognises other relationships between the main components, in addition to those
that flow from left to right (indeed, between the subcomponents too). For example, the model
postulates that Determinants can alter the amount and type of Entrepreneurial Performance,
which in turn leads to changes in an Impact category, such as economic growth. But
economic growth itself will have an impact on Determinants, by affecting ease of access to
finance, for example. Or a buoyant economy might encourage more entrepreneurs to take the
steps to implement a business idea even if the Determinants are unchanged.
This model establishes a simple framework so that consistent, comparable and relevant data
collection can proceed. Such data will help analysts to understand the interactions that may
exist and target policies more appropriately.
The sections that follow provide a detailed description of each of the subcomponents that
have been identified by the OECD and its partners for each of the three main groups described
3. Impact of Entrepreneurship
The major social and economic objectives related to entrepreneurship in the context of this
framework have been identified as job creation, economic growth and poverty alleviation
(Figure 2). Each of these objectives can be more precisely defined in terms of further specific
objectives such as export growth or higher numbers of self-employed, which provide
indicators for part or all of the more macro ‗impact‘ indicators. Fortunately, most of these
indicators have meanings and uses beyond entrepreneurship studies or policy making and so
their availability and international comparability are for many countries unlikely to be limited.
Perhaps the most important point to make here however is that of the three major flows in the
framework this is arguably the least important in the context of this framework‘s objectives -
to improve and motivate the quality and availability of information pertaining to
entrepreneurship, since most of these indicators are already readily available.
Policy makers and analysts who draw on this framework are almost certainly more likely to
draw and on use the indicators within the ‗determinant‘ and ‗entrepreneurial performance‘
sections to determine whether they correlate with any potential ‗impact‘ indicator they wish to
affect/analyse, irrespective of whether they are included as one of the ‗ impact‘ indicators
identified in this framework.
Moreover one needs to recognize that the ‗impact‘ of entrepreneurship performance indicators
on these macro-based objectives is not always so transparent and, indeed, rarely singular, in
the sense that they are only affected by the identified performance indicators. Jobs created in a
new firm, for example, will potentially affect employment in other firms, so the general
equilibrium effects of these new jobs will depend on the functioning of the total economy.
Indeed the same is true, and arguably more so if one considers new firms created through
Schumpeterian creative destruction processes.
In that sense one could argue that the necessity to identify ‗impact‘ indicators is limited. But
their role in the framework is essentially to illustrate the theory that policy measures,
introduced at the determinant level, stimulate increases in the performance indicators that
have an impact on the final policy objective. Returning to the analogy made earlier regarding
transport, one could say that we are interested in providing the wheels, wings, hulls, engines,
seats, speedometers and GPS systems that allow passengers to get to where they want to. We
also provide some examples of the most popular destinations but ultimately it is the
passengers who decide where they want to go.
Figure 2 below shows the framework with the key ‗impact‘ sub categories included. Partly
reflecting the reasons outlined above, no indicators are currently identified within these sub-
categories although many are clearly obvious candidates, such as GDP growth, Gini
coefficients, employment indicators, average/median wages and salaries, relative poverty etc.
As the framework is utilized by analysts and the links between the performance indicators and
specific impacts become clearer, on the basis of empirical evidence, it will be easier to
populate these sub-categories with indicators. All the same, the EIP and its partners will work
in the short to medium term to further develop this section to include specific indicators.
Figure 2: The OECD/EUROSTAT framework for Entrepreneurship indicators – adding
categories for entrepreneurial impact
3. Entrepreneurial performance
Given the multi-faceted nature of entrepreneurship, the identification of a single indicator that
measures it is non-trivial, and, moreover, given the different ways its impact can be measured,
arguably, not the best course of action.
As such, we are not proposing a single measure to understand and compare the amount and
type of entrepreneurship that takes place across countries. In this sense, our approach is to
define a range of indicators each of which paint part of the overall picture. A picture that
necessarily varies according to the viewer‘s perspective (impact target) and our approach
recognises the need for policy analysts to be able to understand and distinguish between the
different types of entrepreneurship and their different impacts.
The segmentation of the total entrepreneurship population is critical for two reasons. First, it
is difficult to identify measures that will capture all entrepreneurs, for example, especially on
a comparable basis across all countries in the short-term, although this is a longer term
objective. Second, the total population of entrepreneurs are engaged in many different types
of entrepreneurial activities and only some of those will be of interest to a given country's
Furthermore, while some policies may enhance or restrain overall entrepreneurship, most
policy instruments will target particular types of entrepreneurship. Thus, it is critical that
analysts and policy-makers are able to measure clearly the specific categories of
entrepreneurship they are trying to affect (using the speedometer and GPS systems in the
transport analogy). In order for countries to benefit from the experience of others, it is also
essential that the Entrepreneurship Indicators we are developing support comparisons across
countries by type of entrepreneurship.
Thus, our list of core Entrepreneurship Indicators identifies a number of indicators that each
target, to varying degrees, different aspects of entrepreneurship and different types of
entrepreneurs. So, for example, whilst we include the total number of business owners in an
economy, including the self-employed, as being an important indicator, we also place high
priority on measuring the creation of firms with employees, the number of high-growth firms
and the number of young, high-growth firms (gazelles). Indeed one might view these
indicators as reflecting some evolution of entrepreneurship on a scale of ‗impact‘ importance.
High-growth firms require the creation of a firm, typically with employees, and many firms
with employees, started out as one-man shows.
The indictors that we have identified below recognise that no measure or combination of
measures will capture precisely the firms that meet the definition of entrepreneurship
embodied above, which is multi-faceted both in its various manifestations and in its impacts.,
It is important to recognise too that the indicators are in some respect merely proxies for
entrepreneurship or entrepreneurs. Not all new firms are truly entrepreneurial, as we define it
above (create value through the identification and exploitation of new products, processes or
markets), nor, will all high-growth firms embody entrepreneurship. Moreover, in some cases
the growth will not reflect entrepreneurship at all, and indeed, it may reflect the very
antithesis of entrepreneurship, for example, firms in monopoly positions can experience rapid
growth that is unrelated to entrepreneurship.
But the inclusion of these indicators reflects the pragmatic approach necessary in the
formulation of such a framework. In other words, it needs to be recognised that the
framework increases our understanding of entrepreneurship by providing indicators that
describe various aspects of the entrepreneurship process and at the same time that need to be
measurable in a harmonised, achievable and comparable way across countries. So, whilst it is
recognised that entrepreneurship is about creating value through the identification and
exploitation of new products, processes and markets it is also recognised that achieving
indicators that measure exactly this phenomenon in a comparable way present formidable
challenges for many countries (OECD 2007b). Thus, we must develop indicators that can be
added to this framework in the future as the statistical capacity within statistics institutes
What is also important is that each indicator provides a spotlight on a specific aspect of the
multi-faceted phenomenon that is entrepreneurship. Depending on where countries are on this
scale and on which policy objectives they wish to tackle (how far away they are from their
preferred destination), this suite of indicators will provide international comparability and
assist in policy formulation.
In theory, a single indicator describing the number of entrepreneurs in an economy is
realisable for all OECD economies, and the feasibility of creating such an indicator in practice
has played a large part in determining the definition of entrepreneurs.
However, it must also be recognised that providing such statistics at the present time is
beyond the reach of many OECD statistical offices using readily available data. To do so
would require, in many cases, new data collection mechanisms and surveys that measure the
number of entrepreneurs that have identified and exploited new products, processes and
This is clearly achievable but is more a longer term objective, which in turn will require
experts in the field to provide working and practical definitions for ‗new‘. Given this
situation, one could argue that the development of this framework is premature. But that view
is incorrect since it is the framework itself that is likely to provide the catalyst and motivation