Endogenous Growth in Entrepreneurial Environments: A Path-Dependent Process for Competitive Regional Development

Abstract

How can regions maximize their competitive advantage? Traditional neoclassical growth theory stresses regional comparative advantage under assumptions of perfect competition and constant returns to scale. Recent endogenous growth theory emphasizes increasing returns and competitive advantage as the ‘opportunity’ source of perpetual growth within business cycles. This article suggests a merger of these neoclassical perspectives, proposing ‘competitive regional development’ (CRD). The dynamic nature of discontinuous, clustering, and creatively-destructive Schumpeterian innovation can self-reinforce the path-dependency of externalities and scale effects in agglomeration. Proposed are increasing externalities and scale effects within an entrepreneurial environment where innovation can be incubated, nurtured, and diffused.