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Entrepreneurship As Recombinant Growth

  • Olsson, Ola

    ()

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

  • Frey, Bruno S.

    ()

    (Institute for Empirical Economic Research, University of Zürich)

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.

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Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 51.

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Length: 20 pages
Date of creation: 31 May 2001
Date of revision:
Publication status: Published in Small Business Economics, 2002, pages 69-80.
Handle: RePEc:hhs:gunwpe:0051
Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/

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  1. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 503-30, May.
  2. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
  3. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August.
  4. Kauffman, Stuart & Lobo, Jose & Macready, William G., 2000. "Optimal search on a technology landscape," Journal of Economic Behavior & Organization, Elsevier, vol. 43(2), pages 141-166, October.
  5. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  6. Griliches, Zvi, 1992. " The Search for R&D Spillovers," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S29-47, Supplemen.
  7. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
  8. Iyigun, Murat F & Owen, Ann L, 1999. " Entrepreneurs, Professionals, and Growth," Journal of Economic Growth, Springer, vol. 4(2), pages 213-32, June.
  9. Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 893-921, October.
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