Entrepreneurial types and economic growth

Most literature on economic growth focuses on expenditure in research and development (R&D) because of its ability to produce technological change. Models based on this principle, however, fail to account for the exceptional growth exhibited in recent year by country such as China where R&D expenditure is virtually non-existing and for the lack of growth observed in countries such as Japan where R&D expenditure is significant. We propose a model in which entrepreneurs may be research-based (those incurring R&D expenditure) or imitators (those not incurring R&D expenditure) and show that, when the returns to R&D expenditure are low, such as in many emerging economies, the presence of a high number of imitative entrepreneurs who increase competition and product supply is sufficient to generate economic growth regardless of the distribution of activity between research-based and imitative and in spite of low R&D expenditure.