Business Climate and Entrepreneurialism
A large range of indicators have been defined:
Business Climate and
Entrepreneurialism
Dimitri Uzunidis
Research Unit on Industry and Innovation/
CLERSE–CNRS (UMR 8019), University of
Lille Nord de France, Research Network on
Innovation, Dunkerque, France
Political Economy, Research Unit on Industry
and Innovation University, University of Littoral
Côte d’Opale, Dunkerque, France
Synonyms
Business relations; Embeddedness; Entrepre-
neurial opportunities; Externalities; Industrial
atmosphere; Organization; Territory
The definition of the business climate is not sim-
ple and homogeneous. There exists no official
definition. We can distinguish three kinds of
definition. (1) The first is based on the opinion
of entrepreneurs over the short term. National
statistical offices question, for example every
3 months, entrepreneurs to know their opinion
about the economic short-term period (evolution
of demand, of production, of stocks, of prices,
orders, their workforce, and so on). It is
a qualitative indicator based on the personal opin-
ion of domestic entrepreneurs. (2) The second
definition consists of measuring macroeconomic
indicators also for a short-term period. For exam-
ple, trend of the Gross Domestic Product (GDP),
of domestic consumption, of exports, of domestic
investments and of the public sector balance, and
so on. This information is intended for foreign
investors who have business projects in a given
country. So for a short-term period, we have an
objective macroeconomic indicator. It is not
based on entrepreneurs’ personal opinions, but
on objective information. In general, the national
office for foreign investment is linked to the
department of foreign affairs. (3) The last defini-
tion is the indicator developed by the World
Bank, «Doing business», which provides mea-
surements of business regulation for local firms.
143 B
starting a business, dealing with construction per-
mits, the supply of electricity, registering property,
obtaining credit, prospecting investors, paying
taxes, trading across borders, enforcing contracts, B
and resolving insolvency. So to synthesize, we will
define the business climate as follows: a set of
macroeconomic indicators which give information
about the economy (rate of economic growth,
demand, investment, and so on); social (evolution
of the workforce); and legal (ownership, business
law,. . .) conditions in a given country, and finally
a set of individual entrepreneurs’ opinions about
the economic and social situations over the
short term.
But, to be exhaustive, we have also to consider
the nature of business networks between entrepre-
neurs and businesses (large and small), and
between entrepreneurs and a large range of institu-
tions (units of research, departments, banks,
administrations, and so on), because global or qual-
itative indicators are inadequate for measuring by
themselves the business climate. These networks
are constituted of financial and information flows
and also transfers of workforce (high-skilled and
low-skilled workers), on a national or local level.
They can be the product of a political decision, but
also of informal practices over a long time period.
The main condition for the existence of a social
network is its stability in the short term, even if its
composition can change in the long term.
The main characteristic of the business climate
today is its great instability, for three important
reasons: (1) for a structural reason: the capitalist
economy is based on permanent (technological,
economic, and social) change (Schumpeter 1982,
2008); (2) for a medium-term reason: since the
1980s governments have developed policies of
deregulation to encourage market synergies. The
weight of the public sector is less important,
whereas market regulation is more developed;
(3) for a short-term reason (and as a consequence
of the two previous reasons): the short-term
economic situation is more and more unstable.
Since the 1990s, the number of economic crises is
higher in developing and in developed economies
in a world context where the interdependencies
between economies are more complex.
B 144 Business Climate and Entrepreneurialism

Business Climate and Entrepreneurialism, Table 1 Three levels of business relations

Business relations at the level of the: Parameters
Territory (as a geographical area) Distance versus speed
Organization (intra- and inter-organization) Hierarchy versus market
Intra-firm versus inter-firm
Vertical versus horizontal
Supervision versus contract
Individual (entrepreneur) Code versus contents
Context versus understanding
(awareness + interpretation)
Source: The author
Field of action and challenge
Transfer: flow
Relations of competition/
cooperation
Coordination strategies,
actions, routines
Communication concept,
ideas, knowledge

What are the resources and socioeconomic
elements which have defined the business climate
where individual entrepreneurs, enterprises, and
institutions function? How do business relations
emerge from the business climate? And, (in
a synergic relation) how does the business cli-
mate build business relations? In the first part of
this entry, we will show that for the entrepreneur
the business climate is determined by his business
relations resulting from the nature of the business
system in which he is integrated (Granovetter’s
concept of embeddedness). In the second part, we
will analyze how the business climate promotes
entrepreneurship. We have constructed our dem-
onstration on a certain number of authors (econ-
omists, sociologists, and historians) that we
consider as the key writers on our subject: Mar-
shall and Pigou (Pigou 2001) for the analysis of
the territory; Coase and Williamson for the anal-
ysis of the organization; Menger and Simon for
the analysis of the individual entrepreneur;
Braudel, Wallerstein, Nelson and S. Winter
(Nelson and Winter 1985) (for historical analy-
sis) and Granovetter (for the analysis of social
networks).
The Business Climate and Business
Relations
Business relations influence the creation of
a business climate which can be positive for busi-
ness growth. These business relations are linked
to externalities which facilitate cooperation
between enterprises and public institutions,
between banks and firms, and between these
organizations and markets. These relations can
be also highly competitive when a new market
appears as a result of creation of a new activity or
following an innovation. Business relations are
developed at three different levels (territory,
organization, and institution), and they are
based on flows of information, learning, knowl-
edge, technology, and so on (see Table 1).
1. Business relations are developed at
a territory level, by definition according to
geographic borders. The business relations in
this geographic area have been built over
a long-term historical period (Braudel 1992;
Wallestrein 2004). This is the result of a long
historical tradition based on dialectical rela-
tions between competition and cooperation.
2. Business relations are also developed inside
an organization and between organizations:
In our case, an organization can be an enter-
prise, a bank, a nonprofit organization, a unit
of research, a ministry, and so on. To find
resources, enterprises develop relations with
other, different organizations and institutions
(banks, ministries, and so on). In a general
sense, firms’ strategies are built on two types
of model: the hierarchical model (organiza-
tion) or the horizontal model (market).
According to the level of transaction costs
(Coase 1937), the enterprise is structured on
one or another model: either the scheme of the
large (and concentrated) firm, or of the small
(and decentralized) firm.
Business Climate and Entrepreneurialism
Business Climate and Entrepreneurialism, Table 2 Business climate and business relations
Business climate
According to indicators:
Objective: Macroeconomic indicators and measurement by institutional indicators (as for example «Doing business»)
Subjective: Entrepreneurs’ personal opinions
Business relations
Territory (geographic) Organizations Enterprises (interrelations/
intra-relations)
Source: The author
3. Individual entrepreneur: The entrepreneur is
an economic and social performer. He takes
decisions according to a set of information and
resources to achieve a given objective (e.g., to
develop a new business, to obtain a loan, to
develop cooperation with another partner, and
so on). This individual entrepreneur plays his
part in a given society which has given values,
roles, and codes of practice. According to this
social environment, he is a rational individual.
It means that he takes decisions based on the
information and resources available to him.
His rationality is limited, though, because he
takes decisions in a given social context
(Menger 2007; Simon 1997).
The concept of business relations is the result
of new area of research in social sciences charac-
terized by the emergence of the concept of social
capital (see the entry on social capital). In
a general sense, social capital is a set of social
relationships owned by an individual, and which
are valorized to give access to new resources. In
this way, individuals can find a new job or
a business opportunity, apply for a loan, and so
on. But the theory (or the theories) of social
capital has (or have) been developed in different
ways. For our subject, according to Mark
Granovetter (1985) analysis is fundamental,
because he shows that business activities are
supported by both formal and informal social
relations. The formal relationships are consti-
tuted by relations with other enterprises and
entrepreneurs, financial institutions, departments,
nonprofit enterprises, and so on. On the other
hand, informal relationships are formed by
145 B
B
Individual entrepreneur
Own resources of the entrepreneur
Business opportunities
Limited economic rationality
family, friends, neighbors, etc. Thus, Granovetter
shows that business relations (in other words
market relations) are embedded in the social
framework. In the Granovetter analysis, the ratio-
nal individual (in a traditional neoclassical sense)
does not exist, because his behavior is partly
determined by the social context where he
operates. The behavior of individuals is deter-
mined by the social context.
Business relations are inserted in the business
climate, which is defined objectively (macroeco-
nomic indicators and so on) and also by subjec-
tive indicators (entrepreneurs’ personal
opinions). Business relations are developed
simultaneously at three different levels: territory,
organization, and individual entrepreneur (see
Table 2).
Business Climate and Entrepreneurship
The key elements of the business climate are the
business relations that are developed at three
different levels (geographic area, organization,
and individual entrepreneurs). In this following
part, we will explain these three elements
according to the given economic theories. Our
objective is not to do an exhaustive account, but
to bring to light some key authors, as we wrote
above.
The territory was introduced into economic
theory at the end of the nineteenth century by
A. Marshall (and before that by Von Th€unen).
Marshall (1919) argues to show the influence of
B 146
the territory on economic analysis, that there is an
«industrial atmosphere» which influences the
development of the local labor market. This phe-
nomenon is linked with competencies and pro-
fessional experience of workers, and also with the
location of firms in a given territory. According to
Marshall, an «industrial district» merges skilled
workers, a set of players (entrepreneurs, bankers,
public authorities), and know-how belonging to
the particular industrial district. Firms in this
territory have developed between them relations
of cooperation. Entrepreneurs have a long history
in the territory where they live. They share the
same values, codes, and social behavior. Business
relations develop in this geographic area in both
formal and informal ways.
The Marshallian analysis has given us a large
range of studies during the twentieth century, and
especially since the 1980s, with for example the
concept of «innovative milieu». “Evolutionary
Economics” developed the concept of «path
dependency» to explain the interactions between
firms, institutions, and workforce which are the
product of an historical evolution. Braudel and
Wallerstein underline the historical dimension of
social and economic evolution. The transforma-
tion of economic and social behavior is very
slow. Routines map out a given path of evolution.
These interactions between enterprises, insti-
tutions, and workforce are the product of
mutual synergies between local players (pub-
lic and private) over a long-term period.
These business relations are developed, thanks
to defined conditions: basic resources, work-
force skills, financial, technological, informa-
tion resources, and so on. The existence of
common social values and social practices
are the engine that synergizes these resources.
The innovative capacity of the firm is not only
influenced by its own resources, but also by
its environment. A strong synergic relation is
built up in this way between local players, but
if the path dependency is very strong, firms
which compose this innovative milieu can
collapse if they become too heavily dependent
on these initial resources.
Firms are located in the given territories. They
were attracted by different types of resources, as
Business Climate and Entrepreneurialism
noted above. But the firm, as an organization, is
not static. It changes according to its strategy,
which is partly built under pressure due to the
competition. In the traditional neoclassical the-
ory, the market is always more efficient than the
organization. Coase shows that the market is not
always cheaper, because there are a number of
transaction costs entailed in using the market: for
instance, costs of obtaining goods or information.
Coase shows that firms will grow when they
can arrange to produce what they need internally
and somehow avoid these coats. Thus, firms can
by their strategy transform the market and the
territory where they function. Even information
is not free. The cost of information can be high,
and the entrepreneurial function is, according to
(Kirzner 1997), to discover opportunities for
investment or profit based on information they
already own.
The traditional neoclassical theory argues that
entrepreneurs have to maximize their profit as
a function of their own resources and the market
price. Simon underlines that the entrepreneur, as
a given individual and rational player, does not
own all the information that he needs, and conse-
quently targets his objectives according to a set of
social factors. Thus, the entrepreneur is
influenced by the social and economic context
where he operates. In consequence, and
according to Granovetter, the entrepreneur as
an individual performer is embedded in
a given social context. Individuals define their
objectives (e.g., to set up a firm, develop an
innovation, get a loan, find a better job, and
so on), according to their own resources (finan-
cial, knowledge, information) and their per-
sonal ambitions (to become rich, to be an
important person, to develop a social enterprise,
and so on). They are embedded in a given
social context. So, there are differences among
individuals (and of course among entrepre-
neurs). Everyone has not the same behavior
in front of the market. Entrepreneurs play
their part in business relations which
create (and of which they are the product)
trust, solidarity, competition, cooperation, cun-
ningness (according to the theory of opportun-
ism of Williamson), and so on (Table 3).
Business Climate and Entrepreneurialism 147 B
Business Climate and Entrepreneurialism, in an informational space, has become the back-
Table 3 Business climate and entrepreneurship: ground for the development of new business
a synthesis
relations.
Business Indeed, the systemic nature of the relation-
relations Key authors Key concepts or ideas
Territory A. Marshall Industrial atmosphere
ships which characterize an economic and social B
milieu explains what gives (or does not give)
A. C. Pigou Externalities
incentives to business creation. However, ought
Organization R. Coase Dialectical relation
we to reduce entrepreneurship and innovation,
O. Williamson Market/organization
Individual C. Menger Individualism,
products of the milieu, only to inter-individual
entrepreneur methodology exchanges, resulting in a new productive combi-
H. Simon Limited rationality nation? Is entrepreneurship only the result of
I. Kirzner Entrepreneurial a specific organization of economic relations?
opportunity Current research takes into account the fact that
O. Williamson Opportunistic the business climate does not refer only to eco-
behavior
nomic and financial interactions but also to the
History F. Braudel Long-term period
social structures which are at the origin of inno-
I. Wallerstein Historical change
vative and entrepreneurial behavior. In addition,
R. Nelson and Path dependence
S. Winter institutions (such as State and local authorities)
Social M. Granovetter Social network play an important role in the organization and the
Embeddedness evolution of socioeconomic structures. In turn,
Formal/informal the business climate contributes to entrepreneur-
relations ship, thanks to the supply management of specific
Source: The author (cognitive, technological, financial, etc.)
resources.

Cross-References
Conclusion and Future Directions
▶ Clusters
The business climate is defined by macroeco- ▶ Entrepreneur
nomic indicators and entrepreneurs’ individual ▶ Entrepreneurship Policies
opinions over the short term. It is the product of ▶ Entrepreneurship Policy
business relations which are developed in ▶ Environmental Determinants of
a synergic process in a given territory or eco- Entrepreneurship
nomic milieu geographically localized (which is ▶ Industrial Atmosphere
defined as a set of resources within given geo- ▶ Innovation and Entrepreneurship
graphic borders). Business relations are devel- ▶ Network and Entrepreneurship
oped in a given social context. Over a long-term
period, entrepreneurs build relationships between
them, which are the result of socioeconomic prac-
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milieu, in contrast the logic of capitalist dynamics Granovetter M. Economic action and social structures.
resides in going beyond geographical borders. The problem of embeddedness. Am J Sociol.
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Business Climate and
Entrepreneurship
▶ Socialized Entrepreneur, Theories
Business Creation
▶ New Forms of Entrepreneurship in a Sustain-
able Knowledge-Based Service Economy
Business Creativity
Igor N. Dubina
Economic Information Systems, Altai State
University, Barnaul, Russia
Synonyms
Corporate creativity; Everyday creativity;
Organizational creativity
Business Climate and Entrepreneurship
Definition
Business creativity is (1) producing ideas
which are new and potentially useful for an orga-
nization, (2) solving nonstandard business
problem, (3) finding and developing new oppor-
tunities for business, and (4) a measurable
resource that needs to be effectively organized
and monitored.
In the current literature, there are many dis-
courses about business creativity as one of the
key factors of competitiveness in this dynamic
“creative age.” From the second half of the twen-
tieth century, alongside with the shift from
“Fordist” to “post-Fordist” economies and the
increasing role of creativity in business, the
“romantic” understanding of creativity as
a manifestation of individual genius has been
replaced by pragmatic understanding of creativ-
ity as an “everyday” and “everyone” natural
phenomenon.
In the business context, creativity is under-
stood as a nonstandard problem-solving process,
the production of new and useful ideas, or gener-
ating and developing new opportunities for
business. Any definition of business creativity is
based on the combination of novelty and effec-
tiveness. For example, creativity, considered in
an organizational context, is often understood as
generating ideas which are simultaneously new
and appropriate (potentially useful) for an
organization. According to this point of view,
creativity is defined in a system with the follow-
ing elements:
• A creative employee(s) generating ideas and
introducing variations
• A domain (a set of available ideas, rules, orga-
nizational routines, and patterns of behavior)
• An expert(s) evaluating suggested ideas and
selecting the variations
If an idea, suggested by the employee, is
deemed by the experts as new and useful, it is
then included in the set of rules, and the domain
subsequently is changed. The “new rules” of
the domain communicate back to the subject,
and the cycle continues. In other words, creativity