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Entrepreneurship As Recombinant Growth

Author

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  • Olsson, Ola

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

  • Frey, Bruno S.

    (Institute for Empirical Economic Research, University of Zürich)

Abstract

The paper presents a model of the entrepreneur as an undertaker of new combinations of ideas. Technology is seen as a set of ideas in a metric technology space where new knowledge is created by the combination of older ideas in the spirit of Schumpeter (1934), Weitzman (1998) and Olsson (2000). Given some intuitive assumptions, we demonstrate that technological progress generated by the convex combination of ideas is constrained by five factors: First, the combinatory process eventually leads to the exhaustion of technological opportunity. Second, the cost of combining ideas increases with the technological distance between the originating ideas. Third, profits are maximized when ideas are combined that are technologically close. Fourth, the technology set is constrained by a social possibility set of socially acceptable ideas. Five, the boundaries implied by the ruling technological paradigm limits the scope for eternal recombinant growth.

Suggested Citation

  • Olsson, Ola & Frey, Bruno S., 2001. "Entrepreneurship As Recombinant Growth," Working Papers in Economics 51, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0051
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    recombinant growth; technology; ideas; technology space;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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