Handbook of Research on Innovation and Entrepreneurship
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Handbook of Research on Innovation and Entrepreneurship

Edited by David B. Audretsch, Oliver Falck, Stephan Heblich and Adam Lederer

Leading researchers use their outstanding expertise to investigate various aspects in the context of innovation and entrepreneurship such as growth, knowledge production and spillovers, technology transfer, the organization of the firm, industrial policy, financing, small firms and start-ups, and entrepreneurship education as well as the characteristics of the entrepreneur.
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Chapter 3: Entrepreneurship and Rent-Seeking Behavior

Marcus Dejardin


Marcus Dejardin Entrepreneurship is now pervasively recognized in economic theory for its contribution in carrying innovation into the economic process and, consequently, in feeding economic growth (Aghion and Howitt, 1992; Carree and Thurik, 2003). Ceteris paribus, different entrepreneurial endowments may explain different rhythms of growth between nations. Among the theoretical discussions of the several conditions entering the ceteris paribus assumption, one appears tremendously fruitful. It relates to the allocation of entrepreneurial resources between more or less socially productive activities. All activities in a maximizing economy are not equally conducive to production and economic growth. Some can even affect growth negatively. The idea is linked with the concept of rentseeking behavior. The connections between entrepreneurship and rent-seeking behavior constitute the topic of this chapter. Having defined the general framework and employed concepts, we shall discuss the allocation of entrepreneurs between different types of economic projects (in other words, between innovative entrepreneurship and rent-seeking), as well as the explicative factors of this allocation. A dynamic set-up follows where interactions between project categories and relations to growth are scanned. We conclude by briefly examining some policy implications. INTRODUCING ENTREPRENEURSHIP AND RENT-SEEKING BEHAVIOR Assuming that the individual arbitrage between different remunerative occupations ends up, in all cases, in the development of socially productive activities, the economy is sketched as a strict income economy. Maximizing individuals exploit their skills as best they can. Moreover, in a perfectly competitive economy, private and social benefits coincide. Now, let us introduce an activity that is remunerated by transfers....

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