Entrepreneurship, Opportunity, and Growth

Abstract

This papers contrasts invention-to-growth policies derived from macroeconomic models with opportunity-to-growth policies suggested by consideration of microeconomic fundamentals. I focus on the effectiveness of opportunity exploitation by entrepreneurs relative to established incumbents - in particular, how the relative price of entry depends on the magnitude of interaction costs, which I define as the sum of conventionally defined transactions costs and additional costs of validation and search attributable to asymmetries of information. I further emphasize the manner in which new tools of communication and collaboration are rapidly changing interaction costs, with implications for the intensity and direction of entrepreneurial effort.