Knowledge Based Entrepreneurship and Regional Economic Performance
4.4 Summary and Conclusion
4 Knowledge Based Entrepreneurship 73 Hence we identify two channels by which knowledge has an impact on produc- tivity of a region’s manufacturing sector. On the one hand, parts of the technical knowledge in a region is taken on by incumbent firms, increasing productivity of a region’s manufacturing sector directly. On the other hand, parts of that technical knowledge is taken on by newly created firms that in turn increase the level of pro- ductivity as well. Note however that both trajectories describe distinct processes.
While new knowledge within incumbent firms increases the level of productivity within the existing production process, entrepreneurial activity increases it through the creation of new firms.
74 D. B. Audretsch et al.
has a positive and significant impact on economic performance. Moreover, new knowledge has a significant positive impact on the regions’ entrepreneurship capital which in turn has a significant positive impact on economic performance. Hence we can indeed identify knowledge to increase the regions’ entrepreneurship cap- ital and moreover that entrepreneurship capital to increase the regions’ economic performance. Thus we find evidence for the above hypotheses.
A straightforward policy implication would be that in a knowledge based econ- omy it is not sufficient to focus policies to generate stronger economic growth on the generation of new knowledge. Equally important is the exploration and use of new knowledge. Entrepreneurship is one mechanism that goes in that direction.
Notes
1This view has been challenged by the literature on absorptive capacity (Cohen and Levinthal, 1990).
2Scherer (1980) or CHI Research Inc. (2002). The U.S. Small Business Administration (1995, p.114) enumerates some 70 important innovations by small firms in the 20th century, ranging from low-tech innovations such as the zipper or bakelite to high-tech ones such as the nuclear magnetic resonance scanner or the microprocessor.
3See Keilbach (2000, Chapter 3) for a review.
4In that respect the notion of entrepreneurship capital is close to the one of social capital (e.g. Putnam, 1993), though not identical. See Audretsch and Keilbach (2004a) for an in-depth discussion of this issue.
5All values of the indicators are transformed to logarithms.
6P denotes the p-value or exact significance level. RMSEA (Root Mean Squared Error of Approximation) is below 0.05 for all three models which means a very good fit. Moreover, the Adjusted Goodness of Fit Index (AGFI) is 0.95 or higher for all models where values above 0.9 indicate a very good fit. See Jöreskog and Sörbom (2001) for the details of global fit indicators.
7Note, that all values of the observed indicators are transformed to logarithms.
8Scatter plots of the observed indicators R&D and patents show that these are not very strongly correlated.
References
Acs, Z. and Audretsch, D. (1990). Innovation and Small Firms. MIT Press, Cambridge.
Acs, Z. and Audretsch, D. (1993). Small Firms and Entrepreneurship: An East-West Perspective.
Cambridge University Press, Cambridge.
Acs, Z., Audretsch, D., Braunerhjelm, P., and Carlsson, B. (2003). The missing link: The knowl- edge filter, entrepreneurship and endogenous growth. Technical report, Center for Economic Policy Research, Stockholm.
Arrow, K. J. (1962a). The economic implications of learning by doing. Review of Economic Studies, 29(June):155–173.
Arrow, K. J. (1962b). Economic welfare and the allocation of resources for invention. In Nel- son, R. R., editor, The Rate and Direction of Inventive Activity. Princeton University Press, Princeton.
4 Knowledge Based Entrepreneurship 75 Audretsch, D. and Thurik, R. (2001). What’s new about the new economy? sources of growth in the managed and entrepreneurial economies. Industrial and Corporate Change, 10:267–315.
Audretsch, D., Thurik, R., Verheul, I., and Wennekers, S. (2002). Entrepreneurship: Determinants and Policy in a European-U.S. Comparison. Kluwer Academic Publishers, Dordrecht.
Audretsch, D. B. and Keilbach, M. (2004a). Does entrepreneurship capital matter? Entrepreneur- ship Theory and Practice, 28:419–429.
Audretsch, D. B. and Keilbach, M. (2004b). Entrepreneurship capital and economic performance.
Regional Studies, 38:949–959.
Audretsch, D. B. and Keilbach, M. (2005). Entrepreneurship capital – determinants and impact.
Technical Report 4905, CEPR, London.
Bartholomew, D. J. and Knott, M. (1999). Latent Variable Models and Factor Analysis. Arnold Publishers, London.
Baumol, W. J. (2002). Entrepreneurship, innovation and growth: The David-Goliath symbiosis.
Journal of Entrepreneurial Finance and Business Ventures, 7(2):1–10.
Baumol, W. J. and Oates, W. E. (1988). The Theory of Environmental Policy. Cambridge University Press, Cambridge, 2nd edition.
Brock, W. and Evans, D. (1989). Small business economics. Small Business Economics, 1:7–20.
CHI Research Inc. (2002). Small serial innovators: The small firm contribution to technical change.
Technical report, Haddon Heights, NJ 08035.
Cohen, W. and Levinthal, D. (1990). Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35:128–152.
EIM (2002). Smes in europe. Technical report, KPMG Special Services and EIM Business School
& Policy Research, Düsseldorf.
Greif, S. and Schmiedl, D. (2002). Patentatlas Deutschland – Dynamik und Struktur der Erfind- ungstätigkeit. Deutsches Patent- und Markenamt, München.
Griliches, Z. (1990). Patent statistics as economic indicators. Journal of Economic Literature, 28:1661–1707.
Jöreskog, K. and Sörbom, D. (2001). Lisrel 8: User’s Reference Guide. SSI Scientific Software International, Lincolnwood, IL.
Keilbach, M. (2000). Spatial Knowledge Spillovers and the Dynamics of Agglomeration and Regional Growth. Physica Verlag, Heidelberg.
Loveman, G. and Sengenberger, W. (1991). The re-emergence of small-scale production: An international perspective. Small Business Economies, 3:1–38.
Lucas, R. E. (1988). On the mechanics of economic developement. Journal of Monetary Eco- nomics, 22:3–42.
Marshall, A. (1920). Principles of Economics. MacMillan, Reprint 1994, 8th edition.
OECD (1998). Fostering Entrepreneurship. Organization for Economic Cooperation and Develop- ment, Paris.
Putnam, R. D. (1993). Making Democracy Work. Civic Traditions in Modern Italy. Princeton University Press, Princeton.
Romer, P. (1990). Endogenous technical change. Journal of Political Economy, 98:71–102.
Scherer, F. M. (1980). Industrial Market Structure and Economic Performance. Rand McNally, Chicago, 2nd edition.
Solow, R. M. (1957). Technical change and the aggregate production function. Review of Economics and Statistics, 39:312–320.
Storey, D. J. (2003). Entrepreneurship, small and medium sized enterprises and public policy. In Acs, Z. and Audretsch, D., editors, International Handbook of Entrepreneurship Research.
Kluwer Academic Publishers, Dordrecht.
U.S. Small Business Administration (1995). The State of Small Business: A Report of the President.
U.S. Government Printing Office, Washington, D.C.