David B. Audretsch

1
Entrepreneurship, Cluster Formation the
Strategic Management of Places

• David B. Audretsch

2
The Traditional Economy(Solow Model)
3
The Public Policy Dilemma

• Efficiency vs. Democracy
• Concentration vs. Decentralization

4
Public Policy Response Constraining Firms

• Public Ownership Sweden France
• Regulation Germany The Netherlands
• Antitrust United States
• Small Business Promotion Social Goal at an
  Economic Cost
  
• Creation of the U.S. Small Business
  Administration (SBA)

5
Globalization
6
Strategic Response of Firms to Globalization

• Complacency
• Substitute Technology Capital for Labor
• Decrease Wages
• Outward Foreign Direct Investment
• Shift to Knowledge

7
German Industries
8
German Industries
Change in Employment in Germany and Foreign
Subsidiaries (1991-1995)
9
Stuttgart Region
10
Impact of Globalization

• De-linking Competitiveness of Firms from
  Competitiveness of Places

11
Rise in European Unemployment
12
Knowledge as Source of Competitiveness
13
The New Economy

• Endogenous Growth Model(Paul Romer)

14
Implications of Knowledge-Based Economy
(Limitations of Romer Model)

• Geography of Knowledge
• The Organization of Knowledge

15
Why Is Knowledge Different?

• Hyper-Uncertainty
• Asymmetries
• High Transactions Costs
• Spillovers not Automatic (as Romer assumed)
• Results in Divergences in Valuation of Ideas

16
Inverted Model of Knowledge Production Function

• Knowledge Emboddied (exogenously) in Individual
  Scientists Engineers
  
• Firms Created Endogenously in Effort to
  Appropriate Value of Ideas
  
• Knowledge-Based New Firms Based on Ideas Costly
  to Diffuse Across Geographic Space
  
• Evidence Biotechnology, Software

17
Entrepreneurship Growth

D

Survival Trajectory

• Performance
• Returns
• Wages

B
Incumbent Firm
B
Failure Trajectory
A
B
C
Time
18
The Entrepreneurial Economy
19
Economic Geography in the Knowledge Economy

• Knowledge vs. Information
• The Paradox of Globalization
• The Economic Value of Geographic Proximity
• Emergence of Local Knowledge Clusters
  Agglomerations Silicon Valley, Route 128,

20
Empirical Regularities of New Economic Geography

• Emergence of Knowledge-Based Clusters
• Knowledge Spillovers Account for Geographic
  Clustering of Innovative Activity Production
  
• Shift in Comparative Advantage of High-Cost
  Countries to Knowledge-Based Economic Activity
  
• Emergence of Knowledge-Based Geographic Clusters

21
Clustering of US Patents
22
Conclusions from Research on Economic Geography
and Knowledge Spillovers

• Knowledge spillovers exist and account for
  Industrial Clustering, for both production and
  innovation.
  
• Boundaries of firms are but one means to organize
  and harness knowledge. Geography may provide an
  additional platform upon which to effectively
  organize knowledge

23
Conclusions from Research on Economic Geography
and Knowledge Spillovers

• Composition of economic activity within the
  geographic cluster shapes economic performance of
  Standort
  
• Diversity Improves Performance More than
  Specialization
  
• Entrepreneurship Serves as Conduit of Knowledge
  Spillovers

24
The Strategic Management of Places

• Entrepreneurship matters for growth
• Interpretation of new enabling entrepreneurship
  policies strategic management of places
  

25
Entrepreneurship Policy

• Managed Economy
• Constraining
• Centralized at National Level
• Public Ownership, Regulation

• Entrepreneurial Economy
• Enabling
• Decentralized at Local Level
• Creation Commercialization of Knowledge

26
Entrepreneurship Policies

• Universities as Engines of Economic Development
• Technology Transfer Commercialization
• Private-Public Partnerships

27
Examples from the U.S.

• The 21st Century Fund Indiana
• Austin, Texas
• Madison, Wisconsin

28
The U.S. Small Business Innovation (SBIR) Program

• Established by Congress in 1982 as a Response to
  U.S. Competitiveness Crisis
  
• Federal Agencies (Defense, NIH, NASA, Education,
  Energy) allocate 2.5 of budget for innovative
  small business
  
• 2 billion in 2004
• Goal Stimulate Innovation Entrepreneurship

29
SBIR Impact

• SBIR Firms Have Stronger Performance Examples
  Microsoft, Apple, Intel
  
• Create Entrepreneurial Career Paths of Scientists
  Engineers
  
• Create Entrepreneurial Culture

30

• What astonishes me in the United States is not
  so much the marvelous grandeur of some
  undertakings as the innumerable multitude of
  small ones.
• Alexis de Toqueville, 1835