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Globalization and the Rise of the Entrepreneurial Economy

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Author Info
Audretsch, David B
Sanders, Mark
Abstract

This paper argues that globalization has led to a shift in developed countries from an industrial to an entrepreneurial model of production. Globalization is interpreted as a level shock in the supply of unskilled labor to the world economy, a decrease in the level of political risk associated with outward foreign direct investment (offshoring), and the widespread diffusion of a general purpose technology such as ICT. The impact of these exogenous shocks is then analyzed in a variety expansion model that distinguishes among three types of varieties. Following the life cycle we distinguish among new, mature and offshore production. The above shocks all result in a shift in comparative advantage in developed countries towards new varieties which correspond to the early stage of the product life cycle. Moreover, because entrepreneurs serve as agents that move varieties between life cycle stages, their importance increases due to globalization. The many new opportunities for profit benefit entrepreneurs and skilled labour. By contrast, factors of production employed in the mature stages of the life cycle become less important. Thus, the model explains the emergence of what we label an entrepreneurial economy.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6247.

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Date of creation: Apr 2007
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Handle: RePEc:cpr:ceprdp:6247

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Keywords: entrepreneurship globalization

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Find related papers by JEL classification:
F01 - International Economics - - General - - - Global Outlook
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
O1 - Economic Development, Technological Change, and Growth - - Economic Development
P0 - Economic Systems - - General

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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. Mark Sanders & Jaap Bos & Claire Economidou, 2007. "R&D over the Life Cycle," Working Papers 07-18, Utrecht School of Economics. [Downloadable!]
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