Is Entrepreneurship Always Good for Growth?

Baochun Peng

CRIEFF Discussion Papers from Centre for Research into Industry, Enterprise, Finance and the Firm

Abstract: Entrepreneurship may not be good for growth. We study the role of entrepreneurship in the context of an endogenous growth model. the exercise of entrepreneurship has two features in our model: (i) Entrepreneurs do not carry out research, instead, they select projects from the researchers, and (ii) Entrepreneurs' ability levels are heterogeneous and mutually unobservable. We find that an exogenous rise in the number of high ability entrepreneurs or their ability level may lead to a lower equilibrium growth rate. This negative relationship is caused by the rent seeking element in the exercise of entrepreneurship. Thus our finding challenges the commonly held belief that innovative entrepreneurship is rent creating.

Keywords: Growth; Entrepreneurship; Innovation (search for similar items in EconPapers)
JEL-codes: M13 O31 O32 (search for similar items in EconPapers)
Date: 2000-02
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