Entrepreneurship (what

1
Entrepreneurship (whats the big deal) and the
Macroeconomy in the 21st Century

• Zoltan J. Acs Ph.D
• George Mason University and
• The Kauffman Foundation
• Understanding Entrepreneurship Issues and
  Numbers
• OECD Paris, 26-27 October 2005

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What is Economic Development?

• Attracting new plants (foreign and/or domestic).
  Technology import.
• Expanding and retaining existing businesses.
  Technology neutral.
• Starting and growing new businesses. Technology
  export.
• All of the above.

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Growth Theory

• Solow Model (1956)
• Economies of scale
• Growth comes from new (bigger) plants
• Romer Model (1990)
• Externalities (knowledge spillovers)
• Growth Comes from new (growing) firms

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Figure A Distributions of 1995 Employment by
Age and Type of Establishment
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Figure B 1995-96 Net Job Growth by Age and Type
of Establishment
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Regional Growth

• 394 Labor Market Areas
• Whole U. S.
• Highest Growth Employment
• St. George, Utah - - 23
• Austin, Texas - - 20.3
• Lowest Growth Employment
• Syracuse, New York - - 0.5
• Poughkeepsie, New York -- 7.4

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Firm Birth Rate and Growth
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Regional Employment Growth

• Entrepreneurial Activity ()
• New firms ()
• Small firms ()
• Agglomeration Effects ()
• Density ()
• Specialization ()
• Human Capital ()
• High school ()
• College ()

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Explaining Regional Employment Growth1990-1993
1993-1996 1996-1999

• Entrepreneurial Activity ()
• New firms ( )
• Small firms ( 0 0)
• Agglomeration Effects ()
• Density (- - 0)
• Specialization (- - -)
• Human Capital ()
• High school ( )
• College (0 0 )

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Age vs Size

• Birch (1970s)
• Size is important.
• Fast growth is important.
• DRS (1980s)
• Age and size.
• Davis and Haltiwanger (1990s)
• Age is the key variable.

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What do new establishments (AGE) do?

• Innovation (Acs and Audretsch).
• Employment and job creation (Birch and others).
• Economic Growth (productivity) Davis and
  Haltiwanger and others).

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What is Entrepreneurship?

• Creating knowledge spillovers.
• A knowledge spillover theory of entrepreneurship
  (Acs et al).
• Bridge the gap between theories of
  entrepreneurship and theories of economic growth.
• Opportunity is created endogenously.
• Opportunity is exogenous.
• Identified and exploited.

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Data

• We have good data on establishments.
• We do not have good data on new establishments
  (plants and firms).
• Self employment, new firm start-ups.

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The 21st Century

• In the Solow (1956) world data for growth was
  provided by census data on new and existing
  establishments.
• Lower interest rates Anti-Trust
• In the Romer (1990) world data for growth should
  be provided by new firms that take advantage of
  knowledge spillovers.
• Enabling policies for new firms