Creative Destruction: Business Failure and Entrepreneurship Empirics

Abstract

Business failure is an integral part of the entrepreneurial process and can be a useful empirical proxy for entrepreneurship. The importance of entrepreneurship is widely recognized, but available empirical measures are imperfect. This paper argues that Schumpeter’s conception of creative destruction indicates that business failure can be used as an indication of the presence of entrepreneurship. Data on business failure is available for studies that compare entrepreneurship across states but this data is underutilized in macro-level studies of entrepreneurship.