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Entrepreneurship Capital - Determinants and Impact

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Author Info
Audretsch, David B
Keilbach, Max

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Abstract

Since the early 1980s, the role and general perception of entrepreneurship and start-up activities has changed drastically. In this paper, we investigate what determines regions’ entrepreneurial behaviour and the impact of it on regional economic performance. We argue that economic knowledge not only differs from traditional factors of production due to its public goods characteristic but it is also uncertain. With that perspective, the role of entrepreneurship is to take on the corresponding risk by starting up a new firm and thus to ‘test’ uncertain economic knowledge. This implies that knowledge spills over to the start-up firm and therefore entrepreneurship can be expected to have a positive impact on economic performance in a knowledge-based economy. We test this hypothesis using a production function approach. Using data on German regions, we estimate a two-equation system that regresses on both variables, entrepreneurship and economic performance, simultaneously, thus correcting for an endogeneity bias. We find a significant impact of entrepreneurship capital on economic output. On the other hand, spatially-specific entrepreneurship capital is shaped by regional-specific factors. However, the extent of this is different for knowledge based and non-knowledge based measures of entrepreneurship. We derive policy conclusions from our findings.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4905.

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Date of creation: Feb 2005
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Handle: RePEc:cpr:ceprdp:4905

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Related research
Keywords: economic output; endogeneity bias; entrepreneurship; production function; three stage least squares;

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Find related papers by JEL classification:
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Aloysius Gunadi, Brata, 2007. "Spatial Concentration of the Informal Small and Cottage Industry in Indonesia," MPRA Paper 12622, University Library of Munich, Germany, revised 2008. [Downloadable!]
  2. Jacques Poot, 2007. "Demographic Change and Regional Competitiveness: The Effects of Immigration and Ageing," Population Studies Centre Discussion Papers dp-64, University of Waikato, Population Studies Centre. [Downloadable!]
  3. Chantal Hartog, 2008. "The two-way relationship between entrepreneurship and economic performance," Scales Research Reports H200822, EIM Business and Policy Research. [Downloadable!]
  4. Guiso, Luigi & Schivardi, Fabiano, 2005. "Learning to be an Entrepreneur," CEPR Discussion Papers 5290, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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