The global technology frontier: productivity growth and the relevance of Kirznerian and Schumpeterian entrepreneurship

Esteban Lafuente,Mark Sanders,Zoltan J Acs,László Szerb

doi:10.1007/s11187-019-00140-1

Abstract

We evaluate how country-level entrepreneurship—measured via the national system of entrepreneurship—triggers total factor productivity (TFP) by increasing the effects of Kirznerian and Schumpeterian entrepreneurship. Using a database for 45 developed and developing countries during 2002–2013, we employ non-parametric techniques to build a world technology frontier and compute TFP estimates. The results of the common factor models reveal that the national system of entrepreneurship is a relevant conduit of TFP, and that this effect is heterogeneous across countries. Policies supporting Kirznerian entrepreneurship—e.g., increased business formation rates—may promote the creation of low value-adding businesses which is not associated with higher TFP rates. Policy interventions targeting Schumpeterian entrepreneurship objectives—e.g., innovative entrepreneurship and the development of new technologies—are conducive to technical change by promoting upward shifts in the countries’ production function and, consequently, productivity growth.

Highlights

What explains the large disparities in productivity across economies? to what extent can these productivity gaps be explained by reasons other than the countries’ factor endowments? Productivity growth—for example, resulting from enhanced resource allocation policies or technological advances—has been invoked as a critical component of economic development (Acemoglu and Zilibotti 2001; Barro 1991)
Our findings reveal that the effect of the entrepreneurial ecosystem on total factor productivity (TFP) exclusively originates from the capacity of the former to promote Schumpeterian entrepreneurship that translates into upward shifts of the countries’ production function
Common factor model specifications, the dependent variables are the changes in the TFP index and its components (equation (5)), namely efficiency change, which we link to the catch-up effect, and technical change more related to the effect of innovations

Summary

Introduction

What explains the large disparities in productivity across economies? to what extent can these productivity gaps be explained by reasons other than the countries’ factor endowments? Productivity growth—for example, resulting from enhanced resource allocation policies or technological advances—has been invoked as a critical component of economic development (Acemoglu and Zilibotti 2001; Barro 1991). Various reasons have been proposed to explain productivity discrepancies at country level, including slow diffusion of technology or barriers to technology transfer (Barro and Sala-iMartin 1997; Mankiw et al 1992; Parente and Prescott 1994), differences in endogenous technical change associated with the limited access to technological knowledge and human capital (Lucas 1988; Prescott 1998; Romer 1990; Young 1998), or underdeveloped financial markets (Moll 2014) This literature often assumes that commercialization and diffusion are more or less costless and autonomous processes. Kirznerian entrepreneurship helps economies to move closer to equilibrium under the best technology frontier available

Results

Discussion

Conclusion