13 - Creating an Entrepreneurial Economy

Summary

Introduction

Policy-making for the promotion of regions (e.g., subnational spatial entities) and nations has dramatically changed. Over the last few decades all levels of government, from federal and regional to municipal, have become key players in the promotion of the entrepreneurial economy (Gilbert, Audretsch, and McDougall, 2004; Audretsch, Grimm, and Wessner, 2005). In this context, Audretsch and Thurik (2000) demonstrate that the re-emergence of entrepreneurship and the shift from a market economy to an entrepreneurial economy accelerated due to increased globalization and led to the development of new entrepreneurship policies, which were implemented at all levels of government. As outlined in Chapter 1, and explored in more detail in Chapter 10, the entrepreneurial economy is driven by change and innovation and is characterized by a high degree of turbulence and diversity. This stands in contrast to the managed economy. In this context, Haltiwanger provides fresh data showing that “creative destruction” – meaning a high turnover rate of new but also dying firms which is one characteristic of an entrepreneurial economy – is conducive to economic growth:

The high net growth and high volatility of young firms points towards creative destruction interpretations of U.S. growth dynamics.… [I]t is the process of creative destruction that is contributing to growth. With creative destruction, there is ongoing innovation and market experimentation with a high degree of churning contributing to growth. Of course, this implies that some firms are successful and grow while others are not successful and contract (and perhaps exit). Amongst young firms since both outcomes are likely it is hardly appropriate to target young firms as the sources of growth. […]