Growth and entrepreneurship

In this paper we suggest that the spillover of knowledge may not occur automatically as typically assumed in models of endogenous growth. Rather, a mechanism is required to serve as a conduit for the spillover and commercialization of knowledge from the source creating it, to the firms actually commercializing the new ideas. In this paper, entrepreneurship is identified as one such mechanism facilitating the spillover of knowledge. Using a panel of entrepreneurship data from 18 countries, we provide empirical evidence that, in addition to measures of Research & Development and human capital, entrepreneurial activity also serves to promote economic growth.

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Notes

See Rostow (1990) and Barro and Sala-i-Martin (1995) for a survey. See also Kaldor (1961) and Denison (1967).

As, for example, Grossman and Helpman (1991) have shown, the new varieties of capital goods can just as well be thought of as new varieties of goods entering consumers’ utility functions directly.

A certain level of entrepreneurial activities will always be profitable (L _E > 0), while R&D may or may not be profitable, depending in a non-trivial way on a range of parameters. The degree of entrepreneurial activity, for instance, decreases in the productivity of R&D as long as R&D is profitable. Thus, R&D and entrepreneurship are to some extent substitutes.

As Storey (2003) shows in his rich review of the literature, there have been a large number of studies linking unemployment to entrepreneurship.

For a more detailed description of heteroscedastic and autocorrelation consistent variance (HAC), see, for example, Cushing and McGarvey (1999) or Wooldridge (2002).

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Acknowledgments

Financial support from the Marianne and Marcus Wallenberg’s Foundation is gratefully acknowledged. Excellent research assistance has been provided by Benny Borgman, The Royal Institute of Technology.

Author information

Authors and Affiliations

1. School of Public Policy, George Mason University, Arlington, VA, USA Zoltan J. Acs
2. Imperial College Business School, London, UK Zoltan J. Acs
3. WHU–Otto Beisheim School of Management, Vallendar, Germany David B. Audretsch
4. Indiana University, Bloomington, IN, USA David B. Audretsch
5. King Saud University, Riyadh, Saudi Arabia David B. Audretsch
6. Department of Transport and Economics, The Royal Institute of Technology, Stockholm, Sweden Pontus Braunerhjelm
7. Department of Economics, Weatherhead School of Management, Case Western Reserve University, Cleveland, OH, USA Bo Carlsson

1. Zoltan J. Acs