High-tech Entrepreneurship and Total Factor Productivity: the Case of Innovation-Driven Economies

Abstract

This article aims to shed light on the relationship between total factor productivity (TFP) growth and high-tech entrepreneurship in a group of innovation-driven economies during the period 2007–2014. In this regard, we outline a panel data analysis method. For measuring high-tech entrepreneurship, we consider proportion of early-stage entrepreneurs and established business owners in high or medium technology sectors provided by the Global Entrepreneurship Monitor. Based on the Global Competitiveness Report 2014–2015, business sophistication and innovation are considered control variables. Our findings reveal a non-linear high-tech entrepreneurship-TFP growth relationship in an innovation-driven context after the inclusion of control variables. A disappointing finding is that business sophistication and innovation exert negative impacts on TFP growth. Policy makers should put in place a whole new policy approach accordingly. Policies facilitating innovative start-ups are an important tool to enhance knowledge diffusion and stimulate productivity growth.