An altruism accepted by social commentators and politicians is that entrepreneurism is of critical importance to society. In the last two electoral campaigns in Sweden, politicians like Maud Olofsson, Mona Sahlin and Gudrun Schyman all claimed they were speaking for small business owners.

However, when I talk about entrepreneurship in Swedish, I usually choose to use the word företagande (‘undertaking’) rather than entreprenörskap: both because I find no reason to borrow a French word via English when there is already an excellent Swedish term, and because my grandfather thinks that I am talking about building contractors when I mention entrepreneurs in my research.

If one scrapes a little beneath the surface in the social debate, what appears to be general agreement about the importance of entrepreneurship is somewhat of an illusion: two years ago this spring, the Swedish Institute for Growth Policy Studies (ITPS) published a report that attracted a great deal of attention which argued contrary to previous research that, while productivity in established companies is often higher than in new ones, the focus on starting  new companies is unnecessary – even counterproductive – for Sweden’s economic development.

Two ITPS economists, Andersson och Scocco, argued in the Swedish newspaper DN that “starting new companies can be dangerous.” A number of researchers protested that the Institute’s conclusions were tendentious and overlooked the idea that rising entrepreneurship may be for tax planning purposes, and that compared to other EU countries relatively few Swedes derive their main income from running companies. The counterargument advanced by the ITPS economists was that “entrepreneurs in Sweden are more goal-oriented; that is, those who begin to consider starting a company also become business owners to a larger degree.”

What then does the research say about an explanation like this? Economic theory usually stresses that institutions and incentives shape people’s behaviour – including their desire and level of ambition to start a company. Similarly, sociological theory usually stresses that social norms guide people’s behaviour.

In this article, which is based on a unique study of all 220,000 Swedes with a university degree in the natural sciences, medicine or engineering, the question of whether Swedish entrepreneurs are specifically goal-oriented or not is considered. It is no accident that this was the group chosen. Here is where Sweden’s future competitiveness is expected to develop in the form of new growth companies based on important knowledge. The question we considered was: Does this elite start up companies? And if so, what value do these companies generate over time? We found, nonetheless, that in the eleven years 1990 to 2000, this group started only 7,716 new companies on a full-time basis.

That means just 3.5 percent of the group investigated ventured to start a business as their primary source of income. In contrast, over 20 percent had registered a company as a sideline business at some point during this period. The study suggests that entrepreneurship is not a particularly attractive alternative for university graduates in Sweden. The sizeable differences between having a company as a sideline or as one’s primary source of income indicate that the security a regular job entails is too valuable for university graduates to risk for the highly uncertain income of a business owner.

While the study did not produce any strong support for the view that highly-educated Swedes create particularly valuable companies, it does show that it is common to combine entrepreneurship and a regular job in Sweden. So we asked ourselves what people run a company while holding a job at the same time and why. In a second study, we investigated a larger group of Swedes, over three million between 1991 and 2002, and found that the majority of those shown in the statistics to be entrepreneurs were in fact “combiners” with an income from both their company and a regular job. However, half of all combiners had only a very minor share of their income from their company; in other words, there are many salaried employees who sometimes use their knowledge “on the side” in the capacity of business owner.

This finding is in sharp contrast to ITPS’s claim that there are no problems because the number of new companies in Sweden is rising. These figures for new companies basically conceal the fact that the largest share of these are in fact combiners. This could be seen as a failure for the effort both by the present government and the previous one to stimulate the drive to expand among “solopreneurs” or “microcompanies,” as they are also known.

Our research indicates instead that a very large share of these solopreneurs consist of combiners – with only a minority of these using this combination as a way to get started with full-time entrepreneurship. Nor are these patterns consistent with ITPS’s thesis that entrepreneurs in Sweden are particularly goal-targeted. Rather, the overwhelming majority of entrepreneurs are fairly satisfied with running a small company. 

One explanation for this lack of a desire to expand is that, despite a high degree of uncertainty and risk associated with giving up one’s job and starting a company, this does not seem to be outweighed by the potentially high remuneration of those business owners who succeed. The average business owner in our study earns 80–90 percent what a comparable employee earns in the same industry – similar to the same discrepancy in salaries found in the labour market between men and women.

Just as people in debates about gender equality usually note that women’s salaried work should be assigned a higher value if working life is to become more equal in terms of gender, we see the differences between entrepreneurs and employees as a discriminatory factor in Sweden: entrepreneurs lead a considerably more insecure existence, often without the possibility of taking sick leave, getting insurance for work-related injuries or state-supported income insurance. Our study indicates that nor is this uncertainty outweighed by the possibility of a higher income: a large majority of entrepreneurs earn less than employees, and only a very limited percent of entrepreneurs could be considered to earn high incomes.

Recently, there have been proposals by politicians and other decision makers suggesting that many of the social welfare systems like health, parental and unemployment insurance should be adjusted to include provisional regulations for entrepreneurs. The question is whether this is the right way to go. It is difficult to imagine entrepreneurs simply closing their shop when they have a cold, or staying on to work on their order book or their bookkeeping even though they have a baby at home.

From a research theory perspective, it also seems problematic to try to eliminate the role that risk plays in the entrepreneurship equation. Many of the basic theories about the role of the entrepreneur in a country’s economy described by the Austrian Joseph Schumpeter, the American Frank Knight or our own Erik Dahmén argue the opposite, that society needs entrepreneurs precisely because they are willing to take the risky decisions that many others are not willing to take. Biographies of famous entrepreneurs – however doctored they may be – also tend to describe entrepreneurs not as risk minimisers but as daredevils who engineer all sorts of projects that many around them shake their heads at.

The risk that these individuals take is their own free choice and not a stick they want to negotiate away – rather, it is the dream of success and reward for those who succeed with their projects that is the carrot for entrepreneurs willing to take risks.

However, a popular theme in the modern welfare state is that people need to be insured against all kinds of risk. The Norwegian anthropologist Thomas Hylland Eriksen has studied the paradoxical condition that, even though we live longer, are in better health and are better educated, there is a growing feeling that “society has become harder.” Statistically speaking, the situation is in fact the opposite. There is instead a growing awareness of risk – and thus a growing sense of people’s insecurity. Eriksen’s conclusion is that modern beings are preoccupied with minimising all kinds of risks because we have excessive faith in our ability to control unforeseen events. In his book, he argues that “It would be very liberating if we could realise that there is a great deal we cannot do anything about.” Then what can we do to encourage ambitious entrepreneurship? 

In an international research project that recently started up, we are trying to answer this question by investigating how both sociological and economic factors affect entrepreneurship among 800,000 people in 53 countries. The results show that social norms among people who are like ourselves have a remarkable effect on both the desire to become an entrepreneur and the level of ambition we put into the company – over 50 percent of the variance in entrepreneurial behaviour is explained by neither economic factors like social insurance nor individual factors like education, wealth or age, but instead by norms and attitudes in similar social groups.

They also indicate that politicians and other decision makers can only indirectly affect the ambition level of entrepreneurs: if one can encourage the level of ambition among entrepreneurs, via regulations and institutions, these norms will slowly spread like circles on the water, which is something we see in regional studies, for instance, in the Gnosjö region in Sweden.

We have presented evidence in a number of research articles that indicates the goals of Swedish entrepreneurs are often very limited; most companies are small part-time operations started by individuals who combine entrepreneurship and a regular job. Whereas economic theories stress the importance of entrepreneurs accepting risk taking and the importance to society of encouraging people who feel drawn to entrepreneurship, many political proposals that have been put forth to encourage entrepreneurship have instead involved adjusting the social welfare system to an entrepreneurial life.

On the basis of our research findings, it seems as ineffective as pouring water on a goose – or rather little goslings – to get them to grow. The problem is not getting people to start companies. The problem is that our social structure does not encourage ambitious entrepreneurship with a view to growth. We do not solve this with insurance of various sorts, but by encouraging people to venture a risk. Only by venturing a risk can a person succeed. Often it may not work, and that has to be okay as well. But when I tell my grandfather about companies I shut down, I do not want to say that I chose the lowest level of ambition possible from the very start. I want to be able to say that I really tried to achieve something I believed in.