Creating Competitiveness to spur Economic Performance: the Importance of Encouraging Entrepreneurship and Innovation – by David Audretsch

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There is virtual unanimity that most of the developed world has been suffering from an economic slowdown in recent years. Much of the policy debate, along with focus of the media and public, has been at the macroeconomic level. The result has been a preoccupation with the size of the stimulus and the adequacy of the federal deficit, or alternatively tax cuts at the federal level in the United States, and the fate of the Euro in Europe. The implication for cities, regions and states aspiring to improve their economic performance is that it is largely not in their hands but rather at the level of macroeconomic and monetary policy makers.

The view argued in my recent book Creating Competitiveness: Entrepreneurship and Innovation Policies for Growth (co-edited with Mary Lindenstein Walshok, University of California) suggests that such local policy makers, along with concerned constituencies such as businesses, non-profit organizations and the public, is looking for spurs to generate a strong economic performance in the wrong place. Rather than focus on what national or even supra-national governments can and will do for cities, states and regions, we argue that they need to take accountability for their own economic performance. Rather than passively waiting for “all boats to be lifted by the rising tide of macroeconomic growth and prosperity,” cities, states and regions can actively undertake policies to create the conditions to spur economic performance.

Our book suggests that creating competitiveness does not solely lie in the realm of macroeconomic policy, but can be crucially shaped and influenced by local policy as well. In particular, policies to spur entrepreneurship and innovation are central to creating competitiveness for cities, regions and states. Globalization has shifted the comparative advantage of many, if not most cities, regions and states in the developed countries to economic activity where knowledge, creativity and ideas play an important role. Thus, any type of investment that fosters ideas and creativity, or what can broadly be construed as constituting knowledge, enhances innovation and ultimately economic performance.

However, the investment in ideas and knowledge alone may not suffice in ensuring that the new ideas are actually transformed into innovation. Rather, entrepreneurship can serve as a key conduit for commercializing ideas generated in one organizational context but actually turned into innovations and introduced into the market by a different and new organization. Thus, a key focus of our book is not just on policies to promote innovation but also entrepreneurship as important ways of creating competitiveness.

David Audretsch is a Distinguished Professor and Ameritech Chair of Economic Development at Indiana University, where he also serves as Director of the Institute for Development Strategies. He also is an Honorary Professor of Industrial Economics and Entrepreneurship at the WHU-Otto Beisheim School of Management in Germany. In addition, he serves as a Visiting Professor at the King Saud University in Saudi Arabia, Honorary Professor at the Friedrich Schiller University of Jena in Germany, and is a Research Fellow of the Centre for Economic Policy Research in London. 

His research has been published in over one hundred scholarly articles in the leading academic journals and he is the author and editor of a number of books, including Creating Competitiveness: Entrepreneurship and Innovation Policies for GrowthCorporate Governance in Small and Medium-sized Firms and Handbook of Research on Innovation and Entrepreneurship.

Also available as an eBook for subscribing libraries on elgaronline

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