Globalization and the Rise of the Entrepreneurial Economy

David B. Audretsch () and Mark Sanders

No 6247, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper argues that globalization has led to a shift in developed countries from an industrial to an entrepreneurial model of production. Globalization is interpreted as a level shock in the supply of unskilled labor to the world economy, a decrease in the level of political risk associated with outward foreign direct investment (offshoring), and the widespread diffusion of a general purpose technology such as ICT. The impact of these exogenous shocks is then analyzed in a variety expansion model that distinguishes among three types of varieties. Following the life cycle we distinguish among new, mature and offshore production. The above shocks all result in a shift in comparative advantage in developed countries towards new varieties which correspond to the early stage of the product life cycle. Moreover, because entrepreneurs serve as agents that move varieties between life cycle stages, their importance increases due to globalization. The many new opportunities for profit benefit entrepreneurs and skilled labour. By contrast, factors of production employed in the mature stages of the life cycle become less important. Thus, the model explains the emergence of what we label an entrepreneurial economy.

Keywords: entrepreneurship; globalization (search for similar items in EconPapers)
JEL-codes: F01 J31 O1 P0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-his and nep-tid
Date: 2007-04
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