How is Entrepreneurship Good for Economic Growth?

Zoltan J. Acs25. Economic Conference

How is Entrepreneurship Good for Economic Growth?

Zoltan J. Acs
George Mason University
Max-Planck-Institute of Economics
Kauffman Foundation
E-mail: zacs@gmu.edu

Progress Foundation
The Beauty of Entrepreneurship
October 31, 2007
Zurich, Switzerland

Introduction

How is entrepreneurship good for economic growth? This question would seem to have a simple answer: Entrepreneurs create new businesses, and new businesses in turn create jobs, intensify competition, and may even increase productivity through technological change. High measured levels of entrepreneurship will thus translate directly into high levels of economic growth. However, the reality is more complicated. If, by “entrepreneurship,” one allows inclusion of any type of informal self-employment, then high levels of entrepreneurship may actually mean either that there are substantial bureaucratic barriers to formally creating a new business, or simply that the economy is creating too conventional few wage-earning job opportunities. Under these circumstances, we might reasonably hypothesize that high levels of “entrepreneurship” would correlate with slow economic growth and lagging development.

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