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.

Chapter 4: Entrepreneurship, Culture and Openness

Edmund Phelps and Gylfi Zoega

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


Edmund Phelps and Gylfi Zoega INTRODUCTION Advances in scientific knowledge – in technology – are made by scientists working in research labs around the world. At any point in time there is multidimensional frontier technology that consists of technological breakthroughs made in each industry and each country. Conceiving of new products and new methods against the background of existing technologies and the accessible stock of past products and methods is generally the contribution of business people, as Hayek (1967/1978) understood – the knowledgeable and imaginative businessmen or financiers or end users. Developing and marketing such visions requires the undertaking of entrepreneurs (often the conceivers), whose range and zeal were prized by Schumpeter (1911). Evaluating and trying the new products and methods is done by the cutting edge managers of Nelson and Phelps (1966) and the venturesome consumers of Bhidé (2000). The Hayekian innovators, drawing on the expertise that comes from their specialized experience and close observation, think of new ideas for possible development and subsequent sale in domestic or overseas markets. Schumpeterian entrepreneurs monitor developments in technologies, products and methods at home and abroad and contemplate how profitable it would be to adapt or improve or cheapen existing goods or methods. It follows that while productivity improvements receive a huge boost from technological progress, the two are only loosely linked. A period of significant technological progress can at the same time witness very low rates of productivity growth; and, vice versa, one can have periods with rapid productivity growth and little technological progress....

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