Entrepreneurship and Economic Growth

Abstract

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.

Entrepreneurship and the process of firms' entry, survival and growth

“…In spite of Schumpeter's contribution, and although entrepreneurship had already played a role in economic theory since the works of Richard Cantillon and Jean-Baptist Say in the 18 th and early 19 th century (see Van Praag, 1999), the entrepreneurial function has only in the last few years been systematically proposed as an additional factor in explaining economic growth within developed countries. While endogenous growth theories (see Lucas, 1988;Romer, 1986 andGrossman and Helpman, 1991) highlighted the important role of human capital and R&D as additional explanations of increasing returns in the aggregate production function, various scholars have recently put forward entrepreneurship as a third component of a new "new-growth theory", exploiting the opportunities provided by new knowledge and ideas that are not fully commercialized by incumbent firms (see Acs et al, 2005;Henrekson, 2005;Audretsch, Keilbach and Lehmann, 2006). According to these authors, by serving as a conduit for both entirely new knowledge and knowledge spillovers, entrepreneurship is the missing link between investment in new knowledge and economic growth 1 .…”

Renascent entrepreneurship

“…Figure 1 suggests that entrepreneurial performance outcomes are inherently uncertain. They may result in outcomes like C or D (Audretsch et al 2006). Once an individual has attained point C, she is confronted with the decision of re-entering into entrepreneurship, again at point A (i.e.…”

The determinants of exit in a developing country: core and peripheral regions

“…In this respect, the empirical evidence shows that firm dynamics may enhance regional job growth (Ghani et al, 2011), increase the commercialization of innovations (Audretsch et al, 2006), accelerate structural change (Gries and Naudé, 2010), and help discover the competitive advantages of a nation (Hausmann and Rodrik, 2003). It is therefore important to understand what determines the entry and exit of firms in developing countries.…”