Emergence of the entrepreneurial society
Abstract: Once dominated by a managed economy, the United States—and, eventually, the entire world—came to acknowledge the incredible power of the entrepreneurial movement of the 1990s. The entrepreneurial society refers to places where entrepreneurship has emerged as a focal point for economic growth, sustainable job creation, and competitiveness in global markets. This article explains why and how the entrepreneurial society emerged, and why it is key to taking advantage of the opportunities afforded by globalization by enhancing the innovation prowess of a nation.
Summary (2 min read)
Max Planck Institute, Germany
- For years, I could not wait to get to Ireland to see and to experience this great economic boom, but I guess I should have come a few years sooner.
- Since European economies did not prosper in the 1990s, it was not surprising that at the turn of the century Europe was making efforts to try to reignite growth and to generate employment.
- Countries with a deficiency of large corporations focused their develop - ment largely on attracting inward foreign direct investment.
- So the purpose of this lecture and the underlying research behind it, is to try to uncover what entrepreneurship has to do with economic growth.
II A PUBLIC POLICY DILEMMA: EFFICIENCY VERSUS DECENTRALISED DECISION MAKING
- An entire generation of scholars in the emerging field of Industrial Organisation identified the driving force of efficiency and productivity at firm and industry levels.
- What this meant for public policy was that there seemed to be a trade-off between having the scale economics of concentrated industry and firms, on the one hand, as against the benefits of having decentralised decision makers on the other hand.
- Countries like Sweden and France favoured concentrated ownership of industries.
- If you look at examples in the chemical industry, say Hoechst, you can see that while total employment went down a little, employment increased outside of Germany, again leading to many fewer employees in Germany.
- It was there I first heard the phrase ‘Swedish Paradox’, which states that if investing in knowledge is so important, like the economists say it is, why is growth and employment creation so elusive in Sweden.
IV THE KNOWLEDGE FILTER
- Well, had European leaders looked across to the other side of the Atlantic, they would have discovered that they did not have a monopoly on this paradox.
- The authors see this knowledge filter not just from knowledge generated in universities, as Senator Bayh was talking about, but they also see it in knowledge generated in the private sector from private companies.
- So they went to their boss, they went to their boss’s boss and said “let us start producing this business software”.
- They went to the three top banks in Germany.
- The point being that I think any time you hear of a knowledge context where the asset is not physical but rather intangible, like ideas, example after example after example of what one person thinks is a good idea, another person might not.
V ENDOGENOUS ENTREPRENEURSHIP
- So this is what leads to what the authors now call endogenous entrepreneurship, which refers to people endogenously creating a new firm to pursue and implement their ideas, dreams, and passions when they are unable to in the context of an existing firm.
- This suggests that in order to get more innovation the authors do not just start with the firms that exist but rather start with society, people, and then ask how can these people be facilitated and enabled to pursue ideas and start companies that are going to generate growth.
- High-growth regions have a low knowledge filter, so that knowledge is able to spillover.
- The authors know that this is happening because of globalisation, with employment being shifted due to outsourcing and offshoring, to some degree by the companies themselves to other places.
- I think that this is why the authors are seeing such a move towards an entrepreneurial economy and the European entrepreneurial policy response.
VII EUROPEAN ENTREPRENEURIAL POLICY RESPONSE
- My view is that Europe has gone through a process of shifting away from the old economy or the capital-based economy characterised by the post-World War II public policy debate, towards this very different economy, what I call an entrepreneurial economy.
- Places that do well in the European and, North American contexts have something extra over capital – they have entrepreneurship.
- It was to create companies like General Motors, US Steel – the great manufacturing companies.
- There was also recognition of the law of comparative advantage.
- In the middle of the 1990s the continent of Europe really went through stagnation – low growth, and more unemployment, and it was clear that globalisation was hitting Europe.
VIII CONCLUDING REMARKS
- To drive efficiency, you need economies of scale, but this raises the challenge when firms are not trusted to grow unabated.
- Public ownership regulations, tended to be national policies.
- Let me finish with a quote from Goethe which suggests that maybe this is not so new.
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