Entrepreneurship and Global Competitiveness in Regional Economies: Determinants and Policy Implications: Volume 22

At a time when policymakers and macroeconomists are frantically searching for actions that could spur economic growth, avoid stagnation, and encourage job creation, entrepreneurship again is the focus of attention. This is as it must be. Entrepreneurship leads to new products, new processes, new ways of doing things that break an economy from old patterns, those that are not providing greater wellbeing and addressing critical economic and social demands. Concurrently, the post-2008 era has seen a strong emergence and boundaries of new economic geographies. Regions are organizing to be globally competitive while drawing on regional actors, characteristics, and functions of local innovation environments and systems. This shift brings a new set of opportunities and challenges associated with region-specific cultural, political, and economic environmental interactions, as well as its relationship to broader economic forces. Although regional economy is not a new topic, there is a need for a new perspective on these this issue that more carefully includes entrepreneurship.

Purpose – This chapter aims at exploring the effects of globalization on technological change by focusing on the determinants of the direction of technological change at the firm level of analysis by following the induced technological change approach implemented by the localized technological change hypothesis.

Methodology/approach – In the empirical analysis, we proxy the direction of technological change by means of the changes in the output elasticity of capital and analyze how it is affected by the changes in factor market costs and firms' attributes for a panel of 1,113 companies listed on UK and the main continental Europe financial markets for the period 1995–2003.

Findings – We find that small firms are more likely to introduce capital-intensive technological changes while large firms will introduce skill-intensive technological changes.

Research limitations/implications – Our model provides a clear analytical framework that interprets the growing skill intensity of the advanced economies as the result of the introduction of new technologies induced by the growing globalization and biased by the characteristics and the types of innovation strategies of the firms.

Originality/value of paper – In so doing, the chapter adds to the existing literature in that it first explores the effects of globalization upon factor markets and, second, it investigates the effects of the direction of technological change within a microeconomic perspective.

Purpose – This chapter analyzes the effects that the international integration of product markets induced by globalization exerts on the direction of technological change at the industry level.

Methodology/approach – In order to do so it elaborates an interpretative framework that complements the classical inducement hypotheses with the Schumpeterian literature and the localized technological change approach, putting forward the hypothesis that technological change is biased by the dynamics of both factor and product markets. We argue and show that not only the changing levels of input costs but also the changing prevalence of product and process innovations affect the direction of technological change: specifically when product innovations prevail technological change is skill-biased, while when process innovations play a major role innovation is capital intensive.

Findings – Following this perspective we analyze the interindustrial variance of the output elasticities of labor of the main advanced economies in recent years and claim that such heterogeneity can be understood as the result of differentiated innovative reactions of firms to changes induced by the globalization of the markets: fast-growing sectors innovate mainly through (skilled) labor-augmenting technological change, while mature industries rely more on capital-enhancing innovations. The empirical evidence supports our hypotheses and shows that the variance of the output elasticity of labor in a panel data estimate across 17 manufacturing sectors in 16 OECD countries from 1995 to 2006, is significantly and positively associated with the rates of growth of employment, wage levels and their rates of increase, and R&D intensity.

Originality/value of paper – By investigating the variance of output elasticities at the industry level the chapter provides new insights within the literature focused on the bias of technological change.

Purpose – This chapter examines how informal and formal entrepreneurial institutions are influenced by economic crises. These institutions act as the foundation for many, if not all, entrepreneurial activities, but they are highly vulnerable to change during times of crisis.

Design/methodology/approach – This chapter uses a case study of software entrepreneurs in Ottawa, Canada, to better understand the influence of the 2001 and 2008 recessions on the social and economic aspects of entrepreneurship. This case is examined through a set of 39 semi-structured interviews with entrepreneurs, investors, and economic development officers.

Findings – While informal entrepreneurial institutions have adapted to a changing economic environment, formal institutions and government programs have so far failed to do this. This results in less effective entrepreneurship support programs.

Research limitations/implications – As with other qualitative case studies, these findings are not generalizable to other regions. This chapter calls for further research is needed to better understand the social forces behind institutional change.

Practical implications – This chapter argues that entrepreneurship support programs must be customized to the informal social institutions that underlie all entrepreneurial behavior and practices. This alignment potentially increases the usefulness of such programs to entrepreneurs.

Originality/value of the paper– While entrepreneurship in Ottawa has been carefully studied, there has been very little work examining how technology entrepreneurship in Ottawa has fared after the decline of the telecommunications market. This chapter is useful to both entrepreneurship scholars as well as practitioners and policy makers interested in how entrepreneurial institutions react to crises.

Purpose – The purpose of this chapter is to investigate empirically whether entrepreneurship causes growth or whether growth creates a prosper environment for entrepreneurship.

Design/methodology – We perform a co-integration analysis using an error correction model on data from 34 countries spanning 13 years to assess the causality issue between growth (proxied by GDP per capita) and entrepreneurship (proxied by self-employment). Our analysis also includes other variables deemed to influence growth.

Findings – The results from an error correction model show that self-employment Granger causes GDP per capita while the opposite direction is not statistically accepted. Moreover, these results suggest that increases in self-employment increase GDP per capita over the short-term but leads to a GDP per capita decrease at a long-term horizon.

Research limitations and implications – We use a linear model to estimate the relationship between self-employment and Growth. Consequently, a more complex model allowing for nonlinearities and additional variables might be more accurate. The empirical investigation is limited to self-employment, which is one facet of entrepreneurship, hence it will be interesting to introduce other measures of entrepreneurship. A direct implication of our study is that rather to be a sustainable economic driver, self-employment seems to resolve only a short-term problem.

Value – The chapter contributes by analyzing the relationship between self-employment and growth by using a co-integration analysis. Consequently it offers a more rigorous appreciation of the direction of causality as well as the long- vs. short-term relationships.

Purpose – The purpose of this chapter is to advance understanding of regional industry or innovation clusters and the opportunities that the cluster framework provides policymakers for delivering economic impact, clarifying economic priorities, and coordinating disparate programmatic efforts, and to articulate some basic principles for formulating cluster strategies.

Methodology/approach – As the cluster concept enters its third decade and the body of related literature reaches a new level of maturity a consensus has emerged among academics and policy thinkers on the economic benefits of clusters. In fact, clusters have emerged as major focus of economic and policy discussion just now – in what the authors dub a “cluster moment” – by dint of their demonstrated practical impact, their value in paradigm discussions, and their potential utility in policy reform. The chapter reviews the benefits of clusters and traces their ascendance – and re-emergence post-recession – among policy thinkers.

Findings – New research confirms that strong clusters tend to deliver positive benefits to workers, firms, and regions. As a paradigm, they reflect the nature of the real economy and as a matter of policymaking, clusters provide a framework for rethinking and refocusing economic policy. In pursuing cluster-based economic development strategies, policy leaders should not try to create clusters; use data to target interventions, drive design, and track performance; focus initiatives on addressing discrete gaps in performance or binding constraints on cluster growth; maximize impact by leveraging pre-existing cluster-relevant programs; align efforts vertically as well as horizontally; and let the private sector lead. All three tiers of the nation's federalist system have distinct and complementary roles to play in advancing the cluster paradigm.

Research limitations/implications (if applicable) – The paper includes no new/original data.

Practical implications (if applicable) – Given that clusters have emerged as a major focus of economics and policy, this chapter lays out a core set of general principles for pursuing cluster-based economic development strategies – and for avoiding common pitfalls – to which policymakers can adhere.

Originality/value of paper – The chapter advances cluster thinking and cluster strategies as a paradigm with the potential to accelerate regional economic growth and assist with the nation's needed restructuring and rebalancing toward a more productive post-recession economy.

Purpose – The purpose of the chapter is to sketch the historical and evolutionary development of the Wichita Aircraft Manufacturing Cluster from inception to present and provide a descriptive narrative of aircraft industry knowledge spillovers currently driving effort to establish a Medical Device Manufacturing Cluster. The chapter illustrates how carbon-fiber composite materials knowledge and technology developed for use in the aviation industry is facilitating the creation and growth of medical device manufacturing.

Methodology/approach – We use an historical case study approach to trace the development of the aircraft cluster in the Wichita, KS metropolitan area. A number of technologies are identified that had initially been adopted by one firm but eventually diffused through other firms in the local cluster and ultimately throughout the industry.

Findings – In addition to providing examples of within industry knowledge spillovers, we provide an example of technology-based knowledge that is diffusing through the aircraft manufacturing industry and is now being used as the basis for establishing an unrelated industry manufacturing cluster. The use of carbon-fiber composites in aircraft manufacturing has diffused from one manufacturer to many in the industry. Subsequently, the knowledge base surrounding carbon-fiber composite materials is being used in a local R&D effort to create a second manufacturing cluster producing medical devices ranging from surgical instruments to joint-replacement implants.

Originality/value of paper – The chapter illustrates a unique example of a manufacturing cluster, intra-industry knowledge spillovers, and inter-industry knowledge spillovers to create a new manufacturing cluster.

Purpose – The purpose of this chapter is to shed new light on the effects of labor market institutions and the economic conditions on self-employment composition that may help the development of a comprehensive strategy to promote job creation and sustained economic growth in the post-2009 era.

Methodology/approach – Using microdata from the European Community Household Panel for the EU-15, we analyze the effects of employment protection legislation, start-up incentives, and economic conditions on transitions from unemployment and paid employment to self-employment, as well as on self-employment survival, with a special focus on the differentiated effect of these variables on different types of self-employment.

Findings – The empirical results suggest that the coexistence of recession periods, start-up incentives, and strict employment protection may be distorting the occupational choice against true entrepreneurs and favor less entrepreneurial forms of self-employment – such as last resort or dependent. Therefore, the differentiated effect of the regulatory environment and the economic conditions over different forms of self-employment – that contribute to job creation, growth and innovation processes in a different manner – may help explaining the different incidence in terms of employment of the economic crisis across countries.

Social implications – During deep recessions, stringent labor regulations might prompt that public expenditure designed to move the unemployed back to employment favors atypical forms of employment outside the scope of labor laws, deteriorating employment rights, and the social protection of workers. As a consequence, the interaction of different LMI and the business cycle should be considered when defining the regulatory environment.

Purpose – The chapter investigates the effects of knowledge on economic growth at the regional level.

Methodology/approach – We elaborate a view on knowledge as the result of a combinatorial search activity and implement indicators synthesizing the network architecture of knowledge structure.

Findings – Empirical estimations corroborate the hypothesis that knowledge coherence and variety, besides the traditional measure of knowledge stock, matter in shaping regional economic performances.

Social implications – Important policy implications stem from the analysis, in that regional innovation strategies, to trigger economic performances, should be carefully coordinated so as to foster exploration strategies, but taking into full account the technological competences accumulated in the course of time.

Originality/value of the paper – The originality of the chapter lies mainly in the methodological approach, which provides operational translation to the view of knowledge as an outcome of a combinatorial search. In this perspective, the chapter also sheds light on previously unexplored aspects of the relationships between knowledge and growth.

Purpose – In an era of increased public accountability, higher education institutions are expected to make greater contributions to local and regional economic development. First, this essay aims to provide a conceptual overview of the conventional approaches to economic development employed by research universities and community colleges. Second, a proposition for a novel approach to economic development that centers on direct collaboration between research universities and community colleges is introduced.

Method/approach – The first section of the essay relies on a critical overview of the scholarly literature that addresses the contributions of research universities and community colleges to local and regional economic development initiatives. The critique draws attention to the counter-productivity of institutional focus on national and global trends and dependency on existing business and industry. The second section includes a proposition for an alternate higher education vision for economic development that builds on the strengths and accounts for the weaknesses of current models as identified in the literature review.

Practical implications – The chapter introduces an alternate higher education vision for higher education that will be valuable to scholars and institutional leaders interested in examining and enhancing the capacities of research universities and community college to contribute to the vibrancy of local and regional economies.

Originality/value of paper – The primary contributions of the chapter are the overview of the higher education literature specific to local and regional economic development and the proposal of a novel economic development vision for higher education that involves institutional collaboration and local and regional positioning and strengthening.