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Entrepreneurship (what’s the big Entrepreneurship (what’s the big deal) and the Macroeconomy in the deal) and the Macroeconomy in the
2121stst Century Century
Zoltan J. Acs Ph.DZoltan J. Acs Ph.DGeorge Mason University and George Mason University and
The Kauffman FoundationThe Kauffman FoundationUnderstanding Entrepreneurship: Issues and NumbersUnderstanding Entrepreneurship: Issues and Numbers
OECD Paris, 26-27 October 2005OECD Paris, 26-27 October 2005
What is Economic Development? What is Economic Development?
Attracting new plants (foreign and/or Attracting new plants (foreign and/or domestic). Technology import.domestic). Technology import.
Expanding and retaining existing Expanding and retaining existing businesses. Technology neutral.businesses. Technology neutral.
Starting and growing new businesses. Starting and growing new businesses. Technology export.Technology export.
All of the above.All of the above.
Growth TheoryGrowth Theory
Solow Model (1956)Solow Model (1956)– Economies of scaleEconomies of scale
» Growth comes from new (bigger) plantsGrowth comes from new (bigger) plants
Romer Model (1990)Romer Model (1990)– Externalities (knowledge spillovers)Externalities (knowledge spillovers)
» Growth Comes from new (growing) firmsGrowth Comes from new (growing) firms
1%
6% 6% 6% 6% 5%
13%
2%
8%6%
7% 10%
19%
5%
0%
5%
10%
15%
20%
25%
30%
35%
0-1 years 2-3 years 4-6 years 7-9 years 10-13 yrs 14-18 yrs 19 or older
Years of age in 1996
Pe
r ce
nt o
f to
tal 1
99
5 e
mp
loym
en
t (1
00
.3 m
il) multi-unit locations
single unit firms
Figure A: Figure A: Distributions of 1995 Employment by Age and Type of EstablishmentDistributions of 1995 Employment by Age and Type of Establishment
150%
143%
-36%
-18%-15% -15% -12% -12% -10%
-7%-19% -14% -15% -20%
-75%
-25%
25%
75%
125%
175%
225%
275%
0-1 years 2-3 years 4-6 years 7-9 years 10-13 yrs 14-18 yrs 19 or older
Years of Age in 1996
Pe
r ce
nt
of
tota
l ne
t jo
b g
row
th (
1.8
7 m
il)
multi-unit locations
single unit firms
Figure B:Figure B: 1995-96 Net Job Growth by Age and Type of Establishment 1995-96 Net Job Growth by Age and Type of Establishment
Regional GrowthRegional Growth
394 Labor Market Areas394 Labor Market Areas– Whole U. S.Whole U. S.
Highest Growth EmploymentHighest Growth Employment– St. George, Utah - - 23%St. George, Utah - - 23%– Austin, Texas - - 20.3%Austin, Texas - - 20.3%
Lowest Growth EmploymentLowest Growth Employment– Syracuse, New York - - 0.5%Syracuse, New York - - 0.5%– Poughkeepsie, New York -- 7.4%Poughkeepsie, New York -- 7.4%
Firm Birth Rate and GrowthFirm Birth Rate and GrowthFigure 2: Entrepreneurship and growth 1991-96
R2 = 0.5834
0
2
4
6
8
10
12
-10% 0% 10% 20% 30% 40% 50%
Employment growth
Bir
th r
ate
Regional Employment GrowthRegional Employment Growth
Entrepreneurial ActivityEntrepreneurial Activity (+)(+)– New firmsNew firms (+)(+)– Small firmsSmall firms (+)(+)
Agglomeration EffectsAgglomeration Effects (+)(+)– DensityDensity (+)(+)– SpecializationSpecialization (+)(+)
Human CapitalHuman Capital (+)(+)– High schoolHigh school (+)(+)– CollegeCollege (+)(+)
Explaining Regional Explaining Regional Employment GrowthEmployment Growth
1990-1993; 1993-1996; 1996-19991990-1993; 1993-1996; 1996-1999
Entrepreneurial ActivityEntrepreneurial Activity (+)(+)– New firmsNew firms (+ + +)(+ + +)– Small firmsSmall firms (+ 0 0)(+ 0 0)
Agglomeration EffectsAgglomeration Effects (+)(+)– DensityDensity (- - 0)(- - 0)– SpecializationSpecialization (- - -)(- - -)
Human CapitalHuman Capital (+)(+)– High schoolHigh school (+ + +)(+ + +)– CollegeCollege (0 0 +)(0 0 +)
Age vs SizeAge vs Size
Birch (1970s) Birch (1970s) – Size is important.Size is important.– Fast growth is important.Fast growth is important.
DRS (1980s)DRS (1980s)– Age and size.Age and size.
Davis and Haltiwanger (1990s)Davis and Haltiwanger (1990s)– Age is the key variable.Age is the key variable.
What do new establishments (AGE) What do new establishments (AGE) do?do?
Innovation (Acs and Audretsch).Innovation (Acs and Audretsch). Employment and job creation (Birch and Employment and job creation (Birch and
others).others). Economic Growth (productivity) Davis and Economic Growth (productivity) Davis and
Haltiwanger and others).Haltiwanger and others).
What is Entrepreneurship?What is Entrepreneurship?
Creating knowledge spillovers.Creating knowledge spillovers. A knowledge spillover theory of A knowledge spillover theory of
entrepreneurship (Acs et al).entrepreneurship (Acs et al). Bridge the gap between theories of Bridge the gap between theories of
entrepreneurship and theories of economic entrepreneurship and theories of economic growth.growth.– Opportunity is created endogenously.Opportunity is created endogenously.– Opportunity is exogenous.Opportunity is exogenous.
» Identified and exploited.Identified and exploited.
DataData
We have good data on establishments.We have good data on establishments. We do not have good data on new We do not have good data on new
establishments (plants and firms).establishments (plants and firms). Self employment, new firm start-ups.Self employment, new firm start-ups.
The 21The 21stst Century Century
In the Solow (1956) world data for growth In the Solow (1956) world data for growth was provided by census data on new and was provided by census data on new and existing establishments.existing establishments.– Lower interest rates; Anti-TrustLower interest rates; Anti-Trust
In the Romer (1990) world data for growth In the Romer (1990) world data for growth should be provided by new firms that take should be provided by new firms that take advantage of knowledge spillovers.advantage of knowledge spillovers.– Enabling policies for new firmsEnabling policies for new firms
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