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 26: Entrepreneurship, Innovation and Institutions

Erik Stam and Bart Nooteboom


Erik Stam and Bart Nooteboom INTRODUCTION In a context of increasing international competition and ageing populations, many Western governments feel the urge to stimulate innovation in order to secure long-term wealth creation. This means that next to the traditional economic criteria of efficiency and equity, innovation is now a more central criterion for economic policy. Innovation is also seen as a tool to move nations through economic crises more quickly and position the nations to have a stronger economy as crises ease. Economic crises may also yield an opportunity to turn destruction into the creative destruction of innovation. Several policy instruments are considered in innovation policy, ranging from investments in public R&D, subsidizing private R&D and cooperation for innovation, to stimulating entrepreneurship. The latter area is receiving increasing attention in innovation policy. The popularity of a policy instrument is not necessarily an indication of consensus about its effectiveness, or clarity about its content. Entrepreneurship is a fuzzy concept that is used in a confusing way not only in policy, but in academia as well. The same is true for innovation. Nevertheless, there are multiple arguments that innovation is a key mechanism through which entrepreneurs drive economic growth (see, e.g., Audretsch et al., 2006; Baumol, 2002; Landes, 1998; Rosenberg and Birdzell, 1986). In this chapter we provide a definition of entrepreneurship in the context of innovation, and discuss its role within a cycle of innovation. This cycle of innovation reflects the growth of knowledge in society: innovation is based...

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