News

Public Policy, Entrepreneurship, and Economic Freedom

The “entrepreneurial spirit” is something that has long been associated
with the driving force behind economic progress and growth.
Joseph Schumpeter (1942) stated that the key to the success of markets
lies in the spirits of entrepreneurs who persist in developing new
products and technologies, through a process he termed as “creative
destruction.” Kaiser (1990) modeled the entrepreneur on the basis of
many historical characterizations, including the Schumpeterian innovator,
and concluded that the major characteristics of the entrepreneur
—innovator, risk taker, and resource allocator—are complementary
and inseparable facets of entrepreneurship. Kirzner (1997) argues
that the entrepreneurial discovery process is vital to the
effectiveness of markets, where discovery entails entrepreneurs discovering
profit opportunities by trial and error.

In this same respect,
Jenner (1998) models the Schumpeterian entrepreneurial process as
a dynamic process in which entrepreneurs search for new combinations
of products and production techniques that will lead to increased
productivity and economic growth. Knight (1921) views the
entrepreneur as the bearer of the uninsurable uncertainty present in
the marketplace, with the profit earned being the compensation for
bearing this uncertainty.

Recently, the conceptual link between entrepreneurship and economic
growth has received renewed interest by economists. As argued
by Minniti (1999), entrepreneurs are the catalysts for economic
growth because they create a networking externality that promotes
the creation of new ideas and new market formations. The finding that increased entrepreneurial activity leads to greater economic
growth has been well-established at both the national and local levels.
For example, Reynolds, Hay, and Camp (1999) show that one-third of
the differences in national economic growth rates can be attributed to
the level of entrepreneurship in each country. Supporting these findings,
Zacharakis, Bygrave, and Sheperd (2000) study 16 developed
economies and find that entrepreneurial activity explains approximately
one-half of the differences in GDP growth between countries.

More recently, Henderson (2002) shows that entrepreneurs significantly
impact economic activity at a more local level through fostering
localized job creation, increasing wealth and local incomes, and connecting
local economies to the larger global economy.

Steven F. Kreft and Russell S. Sobel

Full Report: http://www.cato.org/pubs/journal/cj25n3/cj25n3-15.pdf

Many thanks the the National Association of Seed and Venture Funds http://www.nasvf.org for passing this along. Russ

Sorry, we couldn't find any posts. Please try a different search.

Leave a Comment

You must be logged in to post a comment.