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 theoretical propositions range from positing that entrepreneurial opportunities are not exogenously given but rather endogenously and systematically created by investments in new knowledge and ideas, to the importance
of geographic proximity between entrepreneurial activity and knowledge sources, the impact of location on entrepreneurial performance, and the new roles for board, managers and modes of finance in entrepreneurial firms accessing and absorbing knowledge spillovers. These propositions are subjected to systematic econometric scrutiny and verification using both aggregate data to analyze the links between entrepreneurship and growth, as well as firm-level data to analyze the impact of knowledge spillover on entrepreneurial location, performance, boards, managers and mode of finance. The resulting empirical evidence supports the knowledge spillover of entrepreneurship not only by linking entrepreneurship to economic growth and performance, but also by identifying how the organization and
strategy of entrepreneurial firms are influenced by the need to access, absorb and commercialize external knowledge spillovers. 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. Globalization and its concomitant outsourcing and offshoring is the source of the "destruction", especially in terms of lower skilled jobs. By contrast, in the 21st century global economy, entrepreneurship is constructive by commercializing investments in knowledge and ideas that might never have been commercialized but ultimately result in growth, global competitiveness and employment. Thus,
the emergence of entrepreneurship policy can be interpreted as the attempt to generate entrepreneurial based economic growth by creating an entrepreneurial economy.
Readership: Scholars in the fields of economics, entrepreneurship, innovation and technology, regional studies, growth and public policy. The book should also be of interest to policy analysts and policy makers.
David B. Audretsch, Ameritech Chair of Economic Development, Institute of Development Strategies, Indiana University, Max C. Keilbach, Senior Research Fellow, Max Planck Institute of Economics, and Erik E. Lehmann, Professor, University of Augsburg
"Audretsch, Keilbach, and Lehmann artfully integrate a wide array of findings on firm and industry dynamics, R&D and growth, geography, and startups into a new theory of regional entrepreneurship. Researchers interested in the determinants of entrepreneurship and policy makers looking to promote entrepreneurial activity will find a revealing set of new empirical findings about regional entrepreneurship and economic growth." - Steven Klepper, Arthur Arton Hamerschlag Professor of Economics and Social Science Carnegie Mellon University
"There has been an explosion of entrepreneurship research in economics in the past half-decade. This reflects both the importance of entrepreneurs as a spur to economic growth and the extent of interesting economic questions posed by the new firm phenomenon. This book, which is squarely positioned in this exciting and dynamic literature, helps build our understanding of this important phenomenon through an in depth study of the German experience." - Josh Lerner, Jacob H. Schiff Professor of Investment Banking, Harvard Business School
"Entrepreneurship makes an important contribution to economic growth, and creating an entrepreneurial economy has become a primary goal of public policy. This important book provides answers to two simple but profound questions: *why* does entrepreneurship matter, and *how* does entrepreneurship matter? The authors provide convincing evidence that incumbent firms and other organizations are often unable to realize fully the returns to their own knowledge investments, and that entrepreneurship provides a conduit for the spillover of knowledge that might otherwise have remained uncommercialized. I highly recommend this book to anyone interested in economic growth and development and industrial policy." - Frank R. Lichtenberg, Columbia University
"In this exquisitely researched volume, Audretsch, Keilbach and Lehmann offer a compelling rationale for the emergence of a new form of economic development policy. They argue for entrepreneurship - the formation and growth of economically viable businesses - as an engine of economic growth. Entrepreneurship policy focuses on the businesses that convert investment into returns. Their compelling argument is that the new entrepreneurship policy has far more promise than previous approaches in an increasingly global, knowledge-intensive economic era. I highly recommend this volume for those seeking to understand the increasingly complex, interdependent dynamics that take place in a 'flat,' information-rich and interconnected world." - Rita Gunther McGrath, Associate Professor,
Columbia University Graduate School of Business