Essays on entrepreneurship and economic growth
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This dissertation consists of two essays that theoretically and empirically analyze the roles and impacts of different types of entrepreneurship in the process of economic development. It shows that innovative entrepreneurship is the engine of economic growth and presents supporting evidence at both the country and industry level. In the first essay, by introducing a new factor, entrepreneurial capital, to an endogenous growth framework, we investigate how entrepreneurship contributes to economic growth. We distinguish between innovative and managerial entrepreneurship. Entrepreneurial capital accumulates through investment in innovative entrepreneurship. Our model implies that innovative entrepreneurship is the driving force of long-run rate of economic growth whereas managerial entrepreneurship just raises the level of output in the short run. The allocation between innovative and managerial entrepreneurship, in turn, is explained by the institutional factors that support the market for ideas, and entrepreneurs' own human capital level. We test these hypotheses in a panel of 44 countries over the period 2001-2009 and find supporting evidence. Using data from Global Entrepreneurship Monitor Adult Population Survey, we construct an index of innovative entrepreneurship. The empirical evidence shows that the ratio of innovative entrepreneurship to total entrepreneurship, is significantly enhanced by the strength of property right protection and civil liberties, and entrepreneurs' own educational attainment. More important, we find the higher is the share of innovative entrepreneurship, the higher is the economy's long-term rate of growth. In the second essay, we provide empirical evidence from U.S. manufacturing industries that corroborates the findings in the first essay. We propose to use the self-employment in the high-tech manufacturing sectors to measure innovative entrepreneurship and the self-employment in the non high-tech manufacturing sectors as a proxy for managerial entrepreneurship. In a panel of eight U.S. high-tech manufacturing sectors during the period 1983-1999, we show innovative entrepreneurship has a significant positive effect on TFP and output growth, but the growth rate slows down as innovative entrepreneurship increases. We do not find any evidence that managerial entrepreneurship spurs economic growth in the sixty-four non high-tech manufacturing sectors over the period 1983-1999. Moreover, we show there are spillovers across industries: innovative entrepreneurship in the high-tech manufacturing sectors has a positive effect on both output and TFP growth in the non high-tech manufacturing sectors.