Highlights
- The auto-entrepreneurs status demonstrates ambiguous results that are difficult to interpret as an adequate hybrid status to support entrepreneurship in France.
- The concept of “auto-entrepreneur” emphasizes very few of the key traits and paradigms that are associated to entrepreneurship. Auto-entrepreneur status favors independent employment which is not necessarily associated to entrepreneurship.
- To overcome conceptual difficulties and to understand how government policies and incentives promote two distinct forms of activity (independent versus the creation of a start-up) researchers and policy-makers should work at dissociating and clearly present the two.
1Scholars studying entrepreneurship often call into question the need to seek a better definition of entrepreneurship as a key condition for the development of the field. While the debate on this definitional issue has not led to any concrete answers [2], scholars do acknowledge that entrepreneurship rests on a set of common paradigms. First, we have the traditional Schumpeterian view that highlights the decisive role of innovation and defines entrepreneurs as those that take advantage of market opportunities via organizational and technical innovations [3].
2A second paradigm explains entrepreneurship as an activity with a growth-orientation, pointing that entrepreneurs can improve their chances of survival by encouraging actions that lead to the scaling and expansion of their businesses [4]. Another approach is that of Knight [5] and Drucker [6] who both point to entrepreneurship as a risk-taking activity. Knight considers that entrepreneurs are those who assume responsibility for uncertainty, undertaking activities that they cannot be insured against [7].
3A fourth paradigm views entrepreneurship as an evolutionary process that goes through different stages: from conception, to infancy, from adolescence to maturity [8]. This paradigm explains the selection mechanisms that allow entrepreneurial projects to survive and that include process (strategy) and context (environment). A fifth paradigm sees the entrepreneur as a coordinator of production, someone who adds value by pooling resources that were initially unavailable [9]. Coordination may be defined as an improvement in the allocation of resources, where a decision maker takes an active position by accommodating resources that produce greater outcomes [10]. A last approach focuses on the personality of the entrepreneur, establishing that he or she is more likely to have a drive for achievement, control, problem-solving skills and an innovative capacity [11]. This paradigm also touches on the entrepreneurial drive that comes from need & opportunity [12] as well as the desire to have more independence and autonomy [13].
4These different points of view allow us to envisage a multi-dimensional definition of the entrepreneur that may be seen from agency (the capacity to take action), developmental and creative perspectives. They also show the wide range of interpretations that can be given to the term, depending on the context of research and its application.
France, the country of auto-entrepreneurs?
5“Make France a country of entrepreneurs”, these are the words spoken in 2007 by Hervé Novelli, French Secretary of State in charge of small and medium-sized enterprises who was anticipating the creation of the forthcoming status of the French auto-entrepreneur. Historically and as of the late 1970s, French policies have often strived to make everyone a business owner. Indeed, in 1976, Prime Minister Raymond Barre, claimed that entrepreneurship would be the key strategy to jumpstart a stagnating economy, stating that encouraging the unemployed to set up their business was the answer to rising unemployment.
6In recent years, fostering entrepreneurship has gained momentum and re-gained notoriety becoming a top issue in the political agenda. Simultaneously, the number of new businesses increased from 17,500 in 2000 to 29,000 by January 2008. By September 2016, the number had reached 47,500. Since the appearance of the auto-entrepreneur status in 2009, half of new businesses are created under its umbrella [14].
7The status of auto-entrepreneur was created with the purpose of facilitating entrepreneurship by reducing administrative formalities and providing economic incentives (e.g., a decrease in welfare contributions and VAT exemption amongst others). The status was shaped as a centerpiece of the administrative simplification policy initiated in France by the 2008 “Modernization of the economy” act. This act resulted from the recommendations of a small committee of business and political actors who agreed on the need to simplify the business creation process, deemed bureaucratic and complex [15].
8According to the French Chamber of Commerce auto-entrepreneur is, firstly, the owner of a “solely owned enterprise”; secondly, someone who is independent; thirdly, someone who benefits from a special and simplified form of social security; finally, someone who can opt for a preferential tax regime but also the regime of unlimited liability.
Auto-entrepreneurs ten years after
9When it was first launched the “auto-entrepreneur” status was praised by the political class as well as by the media, both claiming it to be a key initiative to reduce unemployment, create new firms, launch entrepreneurs and empower workers [16]. The program was also presented as a form of hybrid entrepreneurship, an occupation that could be performed in parallel of a wageworker, retired or a student [17]. This notion corresponds well with the academic definition of hybrid entrepreneurs, who are individuals that launch their ventures while receiving a salary or wage [18]. However, as time passed new voices have emerged challenging the real outputs of the program and the fact that it seems to have encouraged a diversion of traditional wage-employment towards independent labor [19].
10Although the initial aim of the program was to foster business creation and entrepreneurship, the heterogeneity of its users, and the opacity of reliable information, makes it difficult to differentiate between wageworkers trying to use the status to make ends meet, the wage-earners recruited as tertiary workers (drivers, carriers, etc.) and those engaged in the creation of new businesses.
11Studies show that the auto-entrepreneur status is often adopted by necessity and in a rather constrained way, which does not lead to real business creation. Moreover, it appears that self-entrepreneurs perceive very low incomes [20]. Finally, becoming an entrepreneur by default, because there is no salaried contract in view, places the auto-entrepreneurs in an awkward economic position [21]. In light of these observations, many authors deplore the perverse effects of a policy that seems to contribute to developing the precariousness of individuals [22] and not necessarily decreasing the risk of entrepreneurship. This leads to one key question. Why is it that this status, did not lead to the sought government outcomes?
Is an auto-entrepreneur an entrepreneur?
12In order to answer to this question, we decided to contrast the entrepreneurship paradigms against the particularities of the auto-entrepreneur status. Our analysis intends to bring light and clarity to the reasons why the program has been resulting in outcomes other than entrepreneurial creation. To do this, we bring our conceptual review of the most relevant entrepreneurship paradigms, and we contrast the auto-entrepreneur status, against them.
13With regards to innovation, Schumpeter establishes that entrepreneurs are able to recombine elements in order to make new products, markets, sources and economic organizations [23]. The auto-entrepreneur status itself has limitations for innovation first, because of an impossibility to realize investments because both the TVA (value-added tax) cannot be deducted and secondly because the investment cannot be amortized. Secondly, the entrepreneur is also constrained by financing opportunities, as he does not have access to public innovation incentives as those associated with France’s investment arm BPI, limited to firms as opposed to individuals [24].
14Meanwhile the risk-orientation of the entrepreneur can be explained, according to Knight, as “the system under which the confident and venturesome ‘assume the risk’ or ‘insure’ the doubtful and timid by guaranteeing the later a specified income in return for an assignment of the actual results” [25]. This perspective calls for the entrepreneur to assume a responsibility over its actions, while acknowledging an adventurous position. In terms of this risk the law of August 4, 2008 [26] establishes that the personal assets of an entrepreneur are liable for any of the activities that he or she undertakes as well as for backing up any contracts. This means that the entrepreneur is firstly and solely responsible for the risk associated to his firm. Also, the auto-entrepreneur does not receive the protection of the “Baux commerciaux” status, which makes him susceptible to have his rent contract rescinded before 9 years and also not to benefit from a maximum level of increase of the yearly rent. Indeed, Levratto and Serverin [27], show “that the modest results obtained by AEs are not offset by a lower level or range of risk. On the contrary, AEs are subject to increased risks compared to other forms of business. We note further that their isolation and the impossibility of relying on an organization that is the corollary, are accompanied by additional risks, specific to this regime”.
15In terms of evolution, Aldrich & Martinez acknowledge in their theoretical development that entrepreneurs must follow a path, a development process that goes from conception to launch. In this sense the auto-entrepreneur status does seem to align with this idea, as it facilitates the transformation of an idea into a project. Additionally, this status does not restrict the number of days or hours that an employee can dedicate to his project, therefore facilitating to a certain extent, the transition into another phase, something that would not be the case under normal wage employment contracts in France.
16When considering the growth orientation, we see that there are at least three factors that forbid this perspective from taking place. The first is the very low maximum revenue that can be declared by auto-entrepreneurs, set, until 2016 at 32,900€. To give some perspective on this value, we can see that, according to the OCDE, the average gross income in France for the same year was 35,809€. The second detriment to growth is the aforementioned inability of entrepreneurs to deduct expenses. In fact not only are these not tax deductible but also, they do not decrease the maximum revenue ceilings. The last factor affecting growth is the firm’s readiness, planning and projection. According to the Barometer Ciel 2009, only 13% of auto-entrepreneurs had a business plan before launching [28]. Preparation is, one of the crucial attributes leading to growth, since it allows the entrepreneur to better establish its positioning and strategy. Finally, the CIEL report also states that 72% of entrepreneurs at the time (2009) were not willing to transform their activity into other types of status (for example in an SME) which is very indicative of the interest of keeping a side activity. In this same line, only 1% of entrepreneurs report the desire to have the maximum revenue limit increased.
17The coordination aspect means that the entrepreneur is capable of putting together resources. Here our analysis is that the auto-entrepreneur status does allow for this capacity, but has two limitations: First, the lack of incentives for investments; secondly, the limitation of human resources, since no other employee can be hired. This means that the person will be limited by his personal coordination capacity and the to the limit of the number of hours he can afford to invest in his project.
18In terms of attitudes and traits, there is little information about the key motivations of auto-entrepreneurs, although there is a natural orientation of the program towards independence. The Barometer Ciel establishes that 47% of them do their activity full-time. In terms of motivations there seems to be a desire to create a productive activity easily (81%). Within the motivation, another report, prepared in 2014 by the Union des Auto-Entrepreneurs, establishes that the three key motivations of auto-entrepreneurs are to make sure to take a minimum revenue (27%), to make at least the minimum-wage (26%) and to make sure to be able to pay taxes (23%). Meanwhile, the same report also shows a high affiliation of auto-entrepreneurs with the idea of being entrepreneurs, as the majority of them do identify that their key objective is to make their activity a success. [29] We believe that this appreciation is a result of the messaging and communication of the government which without a doubt emphasizes this program as one that can lead people to entrepreneurial success.
19Following this review we can gather that the concept of “auto-entrepreneur” emphasizes very few of the key traits and paradigms that support entrepreneurship. The table 1 summarizes our discussion.
Entrepreneurial paradigms and entrepreneurship concepts: contrasting the entrepreneur’s definition against the auto-entrepreneur status
| Entrepreneurial paradigm | Entrepreneur | Auto-entrepreneur |
|---|---|---|
| Innovation (Schumpeter, 1965) | Yes | Limited |
| Risk-orientation (Knight, 1921) | Yes | Yes but higher uncertainty |
| Evolutionary Perspective (Aldrich & Martinez, 2001) | Yes | At creation |
| Growth orientation (Gartner, 1990; Gandry & Welsh, 2001) | Yes | No |
| Coordination (Say, 1946) | Yes | Limited |
| Attitudes / Traits (Robinson & al, 1991) | Yes | Not sufficient information |
Entrepreneurial paradigms and entrepreneurship concepts: contrasting the entrepreneur’s definition against the auto-entrepreneur status
The consequences for policy making
20The previous analysis allows us to understand the source of many of the irreconcilable contradictions that lead the auto-entrepreneur status at odds of encouraging entrepreneurship. In order to further our analysis we think it is important to review the additional policies and incentives deployed by the government to accompany the auto-entrepreneur status.
21In table 2, we introduce a non-exhaustive list of existing policies and incentives for commercial development (as an indicator of growth) and innovation. This table provides practical insights and exposes how the auto-entrepreneurs incentives and programs for growth and innovation do not match the criteria treated in entrepreneurship literature. By doing so, we provide evidence, on the reasons why current policies are shaping the auto-entrepreneur status into an independent contracting arrangement rather than into entrepreneurship.
Examples of policies and incentives to promote growth (commercial development) and innovation
Examples of policies and incentives to promote growth (commercial development) and innovation
22We have restricted our analysis to one case in point: the incentives given to the digital technology industries located in the Ile-de-France region. Indeed, since there is a trend for web developers to do business independently (or as free-lancers), we consider the digital industry to be a relevant example for our demonstration. Also, we have chosen to focus only on incentives geared toward commercial development (consequently used as incentives for growth) and incentives for innovation. We found 125 available incentives, 50 commercial development incentives and 75 innovation incentives provided by government and state-run institutions.
23We present in the following table the 15 most popular policies and incentives that are clearly related to the impediment or development of growth and innovation in the case of auto-entrepreneurs or enterprises.
Promoting “auto-entrepreneur” is promoting independent employment, not entrepreneurship
24As per our review, the analysis of policies conclusively shows that auto-entrepreneurs are not eligible for incentives that promote growth, coordination and innovation, even when their activities are related to research & development. Consequently, if we consider growth, coordination and innovation as key factors of entrepreneurship as explained previously, current policies and incentives do not promote it for auto-entrepreneurs but mainly for enterprises. In that sense, the government contributes to shaping auto-entrepreneurs into self-employees rather than into entrepreneurs. If auto-entrepreneurs cannot develop forms of entrepreneurship through growth, coordination and innovation strategies, we can consider, that they are simply individuals looking for alternative sources of revenue.
25Moreover, the majority of French auto-entrepreneurs do not have the minimum wage and solvency conditions to become entrepreneurs. They don’t earn a sufficient income to live, contrary to other self-employed workers [30]. They are, for a large part, already engaged in a complementary activity, with a waged work, a pension or an unemployment allocation (at least 33% [31]). This reflection drives us back to the introduction of our paper, where we question the extent to which, auto-entrepreneurs and the policies accompanying them, will ever result in a successful example of entrepreneurship, and more specifically of hybrid-entrepreneurship. We can conclude that there are no elements that substantiate such assumption. While the incentives to some of the key features of hybrid-entrepreneurs included the attractiveness for people with higher education [32], technological development [33], human capital development [34] are not aligned with the auto-entrepreneur program, this will continue, as shown, to be a driver of independent employment, as opposed to entrepreneurship.
A gap between policy statements and real facts
26Entrepreneurship and independent or self-employment are two different types of activity that hardly overlap in spite of the important conceptual and practical confusions that exist in the academic literature as well as in policies. This is one of the reasons why promoting entrepreneurship is not the most performing economic policy or an adequate form of money distribution for reducing unemployment [35]. From our review, we have showed that the French government policies initially sought to multiply the numbers of auto-entrepreneurs (now micro-enterprises) but the way in which the policy has been set up, has been led to its use as a labor status that favor independent contracting, especially for low qualified people. The latter are the most concerned by unemployment and the most associated with the usual auto-entrepreneur activities. This policy strategy however, is not necessarily against a larger policy objective that affects Europe as a whole; in fact the European Parliament encourages member nations to promote self-employment [36], while working on the quality of life it enables and the social benefits and protections.
27The problem with these policies is the fact that they are portrayed by the government as real entrepreneurship and hybrid-entrepreneurship policies. We assume that hiding the conflictual and ambiguous term underpinnings results from the semantic and conceptual limitations that affect not only this status but the entrepreneurship field in general. As long as no theoretical and formal distinctions between the limits of self and independent employment against entrepreneurship exist, governments will either profit or be at odds with producing comprehensive entrepreneurship programs. This lack of appropriate wording and often abusive presentation also leads to overselling entrepreneurship as the one best alternatives to the economic issues faced by a struggling community. It also leads to a rhetorical portrayal of the entrepreneur as a heroic figure thus making it easier for individuals to agree to become an entrepreneur rather than to become independent. Individuals may feel the pinch of such biased communication in the longer term. There may be side effects and a darker side to such terminological confusion, including reduced pensions, lower wages and meagre growth perspectives for individuals that do not fully engage in growth entrepreneurship as aforementioned.
28Further, previous research has acknowledge that real hybrid entrepreneurs are attracted by appropriate policy [37] and that are faster to react to such, which can make government programs easier to analyze, and to estimate their success. These policies should take into consideration the fact that these hybrid-entrepreneurs are ready to invest their own salaries into making their projects successful, find valuable business opportunities, missed by full-time entrepreneurs, have fewer effects in case of business failure (because of holding another employment) and motivate well educated individuals to test innovation in new markets [38], [39], [40], all key features improving their chances of success.
What is in a word!
29To conclude, the French auto-entrepreneur status must not be equated with entrepreneurship but rather as a measure of independent employment. Entrepreneurship and self-employment are two distinct concepts: the first one is based on innovation and growth and the second is a way of receiving an income. This frequent confusion in entrepreneurship research, is a strong limitation to build research in a robust way. But it is also restricts research capacity to contribute or to criticize entrepreneurship policies or policy makers, because one cannot talk about something that can’t be named.
30Furthermore, we should underline that governments must measure the outcomes of their policies with more objective methods. In France, it is now mandatory to assess the performance and implementation of all projects and policies with objective indicators. Therefore, increases in the number of companies or the number of micro-enterprises started by auto-entrepreneurs may signal an upturn in entrepreneurship while providing useful quantitative data. Yet, the new indicators may only help to partly measure up the results of the policies that have been implemented. This is why we would recommend that the total number of new enterprises and the total number of new micro-enterprises should not be bundled together under one single entrepreneurship indicator that is likely to invalidate the relevance and the robustness of the measurement.
31At a more theoretical level, and in view of the state of the current literature on entrepreneurship and independent work, it seems almost impossible to reconcile two distinct conceptual characteristics of entrepreneurship with the categories of independent work or self-employment. From a methodological point of view, it is no longer acceptable to merge the measurement of the number of auto-entrepreneur statuses with that of business venture creations, as it is not the same to be an independent worker, as it is to open a new start-up. Thus, to overcome conceptual difficulties and to understand how government policies and incentives promote two distinct forms of activity (independent vs contract labor and the creation of new enterprises vs self-employment) we think researchers should work at dissociating and clearly present the two in future studies.
32Finally, there may be an opportunity to utilize the auto-entrepreneur (recently evolved into the micro-entrepreneur) status to enhance policy aimed at the creation of hybrid forms of-entrepreneurship (by opportunity, choice or necessity). However, in its current state, and under the existing policy mechanisms, we can argue this is not the attempt or the interest of policy makers.
Notes
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