Entrepreneurship Capital - Determinants and Impact

24 Pages Posted: 2 Jun 2005

See all articles by David B. Audretsch

David B. Audretsch

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Max Keilbach

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics

Date Written: February 2005

Abstract

Since the early 1980s, the role and general perception of entrepreneurship and start-up activities has changed drastically. In this paper, we investigate what determines regions' entrepreneurial behavior and the impact of it on regional economic performance. We argue that economic knowledge not only differs from traditional factors of production due to its public goods characteristic but it is also uncertain. With that perspective, the role of entrepreneurship is to take on the corresponding risk by starting up a new firm and thus to 'test' uncertain economic knowledge. This implies that knowledge spills over to the start-up firm and therefore entrepreneurship can be expected to have a positive impact on economic performance in a knowledge-based economy. We test this hypothesis using a production function approach. Using data on German regions, we estimate a two-equation system that regresses on both variables, entrepreneurship and economic performance, simultaneously, thus correcting for an endogeneity bias. We find a significant impact of entrepreneurship capital on economic output. On the other hand, spatially-specific entrepreneurship capital is shaped by regional-specific factors. However, the extent of this is different for knowledge based and non-knowledge-based measures of entrepreneurship. We derive policy conclusions from our findings.

Keywords: Economic output, production function, three stage least squares, endogeneity bias, entrepreneurship

JEL Classification: M13, O32, O47

Suggested Citation

Audretsch, David B. and Keilbach, Max, Entrepreneurship Capital - Determinants and Impact (February 2005). Available at SSRN: https://ssrn.com/abstract=734405

David B. Audretsch (Contact Author)

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Max Keilbach

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany
+49 - 3641 - 68 67 70 (Phone)
+49 - 3641 - 68 67 10 (Fax)

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