Public policy spanning a broad range of contexts, ranging from the European Union, to states, cities, and local communities around the globe has turned to entrepreneurship to provide the engine for economic growth, competitiveness in globally linked markets, and jobs. This book explains why entrepreneurship has emerged as a bona fide instrument of growth policy. The knowledge spillover theory of entrepreneurship suggests that entrepreneurship provides a crucial mechanism in the process of economic growth by serving as a conduit for knowledge spillovers. Investments in new knowledge and ideas may not automatically spill over and result in commercialization, as has typically been assumed in models of economic growth. Rather, the existence of what is introduced as the knowledge filter impedes the spillover and commercialization of investments in new ideas and knowledge. By penetrating the knowledge filter and facilitating the spillover of knowledge that might otherwise not be commercialized, entrepreneurship provides the missing link to economic growth. This new focus of entrepreneurship as a conduit transmitting the spillover of knowledge generates a series of theoretical propositions, involving not just the impact of entrepreneurship on economic performance and growth, but also the very nature of entrepreneurship. The book concludes that the new millennium may not be so much about the process of Joseph Schumpeter's creative destruction, where entrepreneurial startups displace and ultimately drive incumbent company's out of business, but rather characterized by creative construction.

Questioning the underlying assumptions of the process of creative destruction, we conceptualize an alternative process of creative construction that may characterize the dynamics between entrants and incumbents. We discuss the underlying mechanism of knowledge spillover strategic entrepreneurship whereby knowledge investments by existing organizations, when coupled with entrepreneurial action by individuals embedded in their context, results in new venture creation, heterogeneity in performance and subsequent growth in industries, regions and economies. The framework has implications for future research in entrepreneurship, strategy and economic growth. Jena Economic Research Papers 2008-008The fundamental question in the emerging field of strategic entrepreneurship is how firms combine entrepreneurial action that creates new opportunities with strategic action that generates competitive advantage (Hitt et al. 2002). We confront this question by developing the creative construction approach, which identifies knowledge spillovers as a key mechanism that underlies new venture formation and development at the micro level, and economic growth at the macro level. The development of this framework flows from the recognition that although strategy and entrepreneurship theory abounds with Schumpeterian accounts of creative destruction and incumbent displacement by new entrants, our understanding of new venture emergence and associated externalities is less acute.By specifying the process whereby ideas, technologies, and structures are rendered obsolete and displaced by new and superior ones, Schumpeter's idea of creative destruction has become the dominant framework for entrepreneurship and economic development. The concept highlights the tension between innovation and selection: innovations of new firms unleash selection pressures on existing firms. The view is particularly powerful in explaining analysis of what happens as economic structures change from within; however, it is remarkably silent with regard to mechanisms identifying how new entrants emerge, why the process of displacement occurs, and whether increasing returns to knowledge investments could benefit entrants, incumbents and the economy alike. We identify some implicit assumptions in this approach, and juxtapose these against insights from accepted frameworks in the strategy and entrepreneurship literature to describe aspects of an emerging paradigm that we call creative construction, with knowledge spillovers as the underlying mechanism.The literature that links knowledge spillovers to entrepreneurship emphasizes that incumbent organizations are an important source of new entrants, particularly when they underutilize the knowledge they create (Agarwal, Echambadi, Franco and Sarkar, 2004;Klepper, 2006;Klepper and Sleeper, 2005;Shane and Stuart, 2002). Building on this work, we identify the endogeneity of entrepreneurial opportunities and action, and the intriguing possibility that Jena Economic Research Papers 2008-008knowledge can leveraged bac...

Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0276.pdf Entrepreneurship Capital and Economic Performance AbstractThe neoclassical model of the production function, as applied by Robert Solow to build the neoclassical model of growth, linked labor and capital to output. More recently, Romer and others have expanded the model to include measures of knowledge capital. In this paper we introduce a new factor, entrepreneurship capital, and link it to output in the context of a production function model. This paper explains what is meant by entrepreneurship capital and why it should influence economic output. A production function model including several different measures of entrepreneurship capital is then estimated for German regions. The results indicate that entrepreneurship capital is a significant and important factor shaping output and productivity. These results suggest a new direction for policy that focuses on instruments to enhance entrepreneurship capital.

Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0276.pdf Entrepreneurship Capital and Economic Performance AbstractThe neoclassical model of the production function, as applied by Robert Solow to build the neoclassical model of growth, linked labor and capital to output. More recently, Romer and others have expanded the model to include measures of knowledge capital. In this paper we introduce a new factor, entrepreneurship capital, and link it to output in the context of a production function model. This paper explains what is meant by entrepreneurship capital and why it should influence economic output. A production function model including several different measures of entrepreneurship capital is then estimated for German regions. The results indicate that entrepreneurship capital is a significant and important factor shaping output and productivity. These results suggest a new direction for policy that focuses on instruments to enhance entrepreneurship capital.

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