The Role of Entrepreneurship Theory and Methods, Practice and Policy
Edited by Sameeksha Desai, Peter Nijkamp and Roger R. Stough
Chapter 4: Determinants and Impact of Entrepreneurship Capital: The Spatial Dimension and a Comparison of Different Econometric Approaches
David Audretsch, Werner Bönte and Max Keilbach 4.1 INTRODUCTION Entrepreneurship in new technological fields is often knowledge- or research and development (R&D)-intensive, therefore it is often referred to as ‘knowledge-based entrepreneurship’. Arrow (1962b) states that knowledge as an input to production is inherently different to the more traditional inputs such as labor and capital. This is for two reasons: (1) knowledge has a public goods characteristic; and (2) the economic value of new knowledge is intrinsically uncertain and its potential value is asymmetric across economic agents. While the first aspect has been addressed and formalized within the endogenous growth theory (Arrow, 1962a; Lucas, 1988; Romer, 1990), the second one has not. Rather, endogenous growth theory implicitly assumes that knowledge, once it has been generated, spills over more or less ‘automatically’ to other firms.1 However, transforming generally available new economic knowledge into viable new products or technologies – the essence of knowledge spillovers – requires investment with uncertain outcomes and therefore bears risks. Often, this investment is made by entrepreneurs. By starting up a business, an entrepreneur literally bets on the product he offers (or will be offering) and thus is willing to shoulder the risk that this process bears. By taking on the risk of developing this uncertain knowledge, entrepreneurs increase the amount of utilized knowledge spillovers. Hence this function of risk-taking is an important one in the innovation process. However the idea that entrepreneurs play an important economic function by taking on risks is certainly not new. In...