Business Dynamics, Entrepreneurship and the Macroeconomy in the by 6GRR8e58

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									 Entrepreneurship (what’s the big
deal) and the Macroeconomy in the
            21st Century



                   Zoltan J. Acs Ph.D
              George Mason University and
               The Kauffman Foundation
   Understanding Entrepreneurship: Issues and Numbers
            OECD Paris, 26-27 October 2005
What is Economic Development?
 Attracting new plants (foreign and/or
  domestic). Technology import.
 Expanding and retaining existing
  businesses. Technology neutral.
 Starting and growing new businesses.
  Technology export.
 All of the above.
               Growth Theory
   Solow Model (1956)
    – Economies of scale
       » Growth comes from new (bigger) plants
   Romer Model (1990)
    – Externalities (knowledge spillovers)
       » Growth Comes from new (growing) firms
                                                                            Figure A:
                                                Distributions of 1995 Employment by Age and Type of Establishment

                                                 35%
Per cent of total 1995 employment (100.3 mil)




                                                 30%                  multi-unit locations
                                                                      single unit firms
                                                 25%
                                                                                                                                             19%

                                                 20%


                                                 15%


                                                 10%                                8%                              7%          10%
                                                                                                     6%
                                                                      5%
                                                                                                                                             13%
                                                  5%
                                                                      6%            6%               6%             6%           5%
                                                          2%
                                                  0%      1%
                                                       0-1 years   2-3 years     4-6 years        7-9 years       10-13 yrs   14-18 yrs   19 or older
                                                                                             Years of age in 1996
                                                                           Figure B:
                                                     1995-96 Net Job Growth by Age and Type of Establishment

                                              275%
Per cent of total net job growth (1.87 mil)




                                              225%    143%
                                                                                                   multi-unit locations
                                              175%
                                                                                                   single unit firms

                                              125%


                                              75%     150%


                                              25%                  -15%                     -12%            -12%
                                                                              -15%                                        -10%       -18%

                                              -25%
                                                                   -7%                                                               -36%
                                                                               -19%         -14%            -15%          -20%

                                              -75%
                                                     0-1 years   2-3 years   4-6 years    7-9 years       10-13 yrs    14-18 yrs   19 or older
                                                                                   Years of Age in 1996
             Regional Growth
   394 Labor Market Areas
    – Whole U. S.
   Highest Growth Employment
    – St. George, Utah - - 23%
    – Austin, Texas - - 20.3%
   Lowest Growth Employment
    – Syracuse, New York - - 0.5%
    – Poughkeepsie, New York -- 7.4%
                    Firm Birth Rate and Growth
                                    Figure 2: Entrepreneurship and growth 1991-96

                    12
                               2
                              R = 0.5834


                    10



                     8
Birth rate




                     6



                     4



                     2



                     0
             -10%        0%                10%            20%            30%        40%            50%

                                                                                     Employment growth
    Regional Employment Growth
   Entrepreneurial Activity   (+)
    – New firms         (+)
    – Small firms       (+)
   Agglomeration Effects      (+)
    – Density           (+)
    – Specialization    (+)
   Human Capital              (+)
    – High school       (+)
    – College           (+)
          Explaining Regional
          Employment Growth
              1990-1993;   1993-1996;   1996-1999


   Entrepreneurial Activity                   (+)
    – New firms               (+ + +)
    – Small firms             (+ 0 0)
   Agglomeration Effects                      (+)
    – Density                 (- - 0)
    – Specialization          (- - -)
   Human Capital                              (+)
    – High school             (+ + +)
    – College                 (0 0 +)
                   Age vs Size

   Birch (1970s)
    – Size is important.
    – Fast growth is important.
   DRS (1980s)
    – Age and size.
   Davis and Haltiwanger (1990s)
    – Age is the key variable.
What do new establishments (AGE)
            do?
 Innovation (Acs and Audretsch).
 Employment and job creation (Birch and
  others).
 Economic Growth (productivity) Davis and
  Haltiwanger and others).
      What is Entrepreneurship?
 Creating knowledge spillovers.
 A knowledge spillover theory of
  entrepreneurship (Acs et al).
 Bridge the gap between theories of
  entrepreneurship and theories of economic
  growth.
    – Opportunity is created endogenously.
    – Opportunity is exogenous.
       » Identified and exploited.
                  Data
 We have good data on establishments.
 We do not have good data on new
  establishments (plants and firms).
 Self employment, new firm start-ups.
              The 21st Century
   In the Solow (1956) world data for growth
    was provided by census data on new and
    existing establishments.
    – Lower interest rates; Anti-Trust
   In the Romer (1990) world data for growth
    should be provided by new firms that take
    advantage of knowledge spillovers.
    – Enabling policies for new firms

								
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