Entrepreneurship and Openness

Entrepreneurship and Openness

Theory and Evidence

Industrial Dynamics, Entrepreneurship and Innovation series

Edited by David B. Audretsch, Robert E. Litan and Robert Strom

A growing body of evidence has documented the critical role that entrepreneurs play in fostering economic growth. But entrepreneurs can only be expected to take risks in ‘open settings’, where individuals and firms are free to contract with one another. In this important book, leading economists explain and document the role of open markets, within and across national boundaries, in facilitating entrepreneurship, innovation and economic growth. The main message of this book is especially timely given growing concerns in developed countries in particular about off-shoring and openness to trade.

Introduction

David B. Auretsch, Robert E. Litan and Robert J. Strom

Subjects: business and management, entrepreneurship, economics and finance, economics of innovation, innovation and technology, economics of innovation

Extract

David B. Audretsch, Robert E. Litan and Robert J. Strom The single most important measure of an economy’s success over the long run is its record on growth, for it is only through the production of more goods and services with a given labor force that residents will be able to enjoy continued improvements in their standard of living. Rapid growth, in turn, requires not only high rates of saving and investment, but most importantly, continued innovation: new products and services, and new ways and methods of producing and delivering them. But inventions alone do not generate innovation. Only when inventions are commercialized – bought by willing buyers – are they diffused throughout an entire economy, thereby raising output. Entrepreneurs, those who launch new enterprises, have proven to be vital to this commercialization process, at least in the United States. Whereas existing firms with well-established products and customer bases may concentrate on incremental improvements of what they already offer, entrepreneurs who have no stake in the status quo may be willing to take bigger risks with untested, or even ‘radical’ ideas. It should not be surprising, therefore, that some of the more important ‘radical’ inventions of the past two centuries have been brought to the marketplace by one or more entrepreneurs rather than by existing firms. Prominent examples include the telegraph, telephone, radio and television; railroads, airplanes and automobiles; computers and the software that runs on them; and air conditioning (Baumol, 2002). Entrepreneurial activity can thrive, however, only in ‘open’ settings in...