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Insights for a new entrepreneurial society

June 16, 2009

In his article “The Entrepreneurial Society”, Audretsch (2009) examines how and why “the driving force of economic growth, employment creation and global competitiveness has evolved so dramatically in the past half century” (p. 246) through the premise that the changing role of entrepreneurship has evolved parallel with three very different views of the economy. The evolution, posits Audretsch (2009), has occurred simultaneously with three important historical periods as well as three economic models. Audretsch (2009) discusses those models and their respective emphases arguing they produce a question of public policy as to how to create an entrepreneurial society.

The Solow economy revolved around the importance of physical capital and labor as they are linked to economic growth in the form of a neoclassical theoretical economic model. During the Solow economy there was a fear of big business and its corruption of society through oligopoly and even collusion. The public policy question of the day was how to reap the rewards of big business without it morally gutting the society it resided in. The Small Business Act was reflective of the mentality toward small businesses at the time and was aimed at preservation rather than facilitation.

The Romer economy saw relatively unchanged policy goals of economic growth but had one distinct difference in the emergence of the knowledge economy. Small business remained at a disadvantage during this period in that knowledge-inputs (e.g. R&D) were required to participate in innovative output. Regardless of the high level of investment in knowledge, economic growth remained stagnant.

The entrepreneurial society emerged with the Knowledge Spillover (KS) Theory of Entrepreneurship and challenged the theories from the Romer and Solow economies. The KS theory states that entrepreneurship takes the necessary step of commercializing knowledge created by larger firms. In this way, the entrepreneurial society is a response to dissatisfaction with the status quo and recognizes the ability of smaller firms to utilize specific expertise to capitalize upon opportunities exogenous to their business model and turn those opportunities into endogenous and marketable knowledge-based business.

By all accounts Audretsch (2009) clearly states that based upon historical analysis of the Solow economy, the Romer economy and the knowledge-based economy, the hope for the economic future resides in fostering and facilitating a high level of entrepreneurial activity on both the large and small business levels. Audretsch (2009) looks somewhat positively and hopefully on the effects of a change in public policy that would accomplish these goals.

If what Audretsch (2009) states is true in that a ramp-up in entrepreneurial response is stimulated by dissatisfaction with the status quo in terms of economic growth then current government-led initiatives seem to be doing everything possible to discourage and cripple small businesses in a variety of ways. It follows then that if any kind of sustainable economic growth is to occur, it cannot be done under the shield of corporate greed or conversely class warfare. While those feelings can be understandable in some circumstances, rationality must prevail.

Witness the fact that the U.S. no longer manufactures much of what it consumes and as a result the majority of the U.S.’s economic livelihood is based upon a service economy, which has shown to be quite vulnerable in the recent past. Unless the U.S. deepens its commitment to innovation and quality, manufacturing will likely not deviate from its decline. Clearly such a commitment is where the entrepreneurial spirit can and will prevail if given the chance: the U.S. doesn’t need to provide a path as much as it just needs to get out of its own way.

Resources:

Audretsch, D. (2009). The entrepreneurial society. Journal of Technology Transfer, 34(3), 245-254.

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