Knowledge Spillover Entrepreneurship in an Endogenous Growth Model

51 Pages Posted: 18 Jul 2013

See all articles by Zoltan J. Acs

Zoltan J. Acs

Schar School of Policy and Government

Mark Sanders

Utrecht University - School of Economics

Date Written: December 10, 2012

Abstract

This paper challenges the key assumption in "idea based growth models" that innovation rents ultimately reward the creation of knowledge. In modern capitalist economies the agents that commercialize new ideas, the entrepreneurs, receive the bulk of the innovation rents and are generally the residual claimant. We develop a model that separates invention from innovation where new ideas are a costless spillover from profit motivated corporate R&D aimed at improving existing production processes. We then show that a central planner can improve over the decentralized equilibrium by reallocating resources between R&D and entrepreneurship. The optimal allocation between commercializers and inventors depends on the relative strength of down- and upstream knowledge spillovers.

Keywords: Innovation Rents, Endogenous Growth, R&D, Entrepreneurship, Incentives, Knowledge Spillovers

JEL Classification: L26, O31, O33, O41, R58

Suggested Citation

Acs, Zoltan J. and Sanders, Mark, Knowledge Spillover Entrepreneurship in an Endogenous Growth Model (December 10, 2012). GMU School of Public Policy Research Paper No. 2013-06, Available at SSRN: https://ssrn.com/abstract=2188960 or http://dx.doi.org/10.2139/ssrn.2188960

Zoltan J. Acs (Contact Author)

Schar School of Policy and Government ( email )

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HOME PAGE: http://home.ubalt.edu/zacs

Mark Sanders

Utrecht University - School of Economics ( email )

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Utrecht, 3584 EC
Netherlands

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