Entrepreneurship, access policy and economic development: Lessons from industrial organization

Abstract

This paper explores some relationships between promotion of competition and economic development that arise from the impacts of entrepreneurial firms. In this respect, two sets of policies are critical for furthering economic development. First, to arrest the diversion of entrepreneurial talent towards non-productive activities, an increased emphasis on preserving rewards from productive innovation is needed – through the protection of commercial freedom, property rights and contracts. Second, given that essential local inputs are vulnerable to monopolization and foreclosure, fostering opportunities for grass-roots entrepreneurship becomes paramount – through a more activist supply-side competition policy emphasizing access to essential business services and other required local inputs. A key message is that the conventional sensitivity of policy concerns about the social welfare effects of foreclosure should be extended to a domain beyond the usual essential facilities of public utilities. It should include access to many other elements of the business infrastructure that are taken for granted in mature market economies, but that pose real barriers to productive entrepreneurship at the grass-roots level in the context of development. Additions to the incipient empirical work in this area could yield substantial policy dividends.