Description
On this brief elucidation concerning centre for technology management entrepreneurship in the knowledge economy erik stam.
Centre for Technology Management
Entrepreneurship in the Knowledge
Economy
Erik Stam, Elizabeth Garnsey
No: 2007/04, April 2007
Centre for Technology Management Working Paper Series
These papers are produced by the Institute for Manufacturing, at the University of Cambridge
Engineering Department. They are circulated for discussion purposes only and should not be
quoted without the author's permission. Your comments and suggestions are welcome and
should be directed to the first named author.
ISBN 978-1-902546-58-2
Entrepreneurship in the Knowledge Economy
Erik Stam, Elizabeth Garnsey
No: 2007/04, April 2007
3
ENTREPRENEURSHIP IN THE KNOWLEDGE ECONOMY
Erik Stam
*
and Elizabeth Garnsey
Centres for Technology Management and International Manufacturing
Institute for Manufacturing
University of Cambridge
Mill Lane
Cambridge CB2 1RX
United Kingdom
Tel: 44 (0)1223 338183; 44 (0)1223 765601
Fax: 44(0)1223 766400
[email protected]; [email protected]
Erik Stam is an AIM-IPGC Research Fellow in the Department of Engineering, University of Cambridge
and Research Fellow at the Max Planck Institute of Economics (Jena-Germany) and at the Netherlands
Council for Government Policy (The Hague-The Netherlands)
Elizabeth Garnsey is a Reader in Innovation Studies in the Department of Engineering and Judge Institute
of Management Studies, University of Cambridge
*
Corresponding author: [email protected]
4
Abstract
This paper reviews the literature on knowledge as a source of entrepreneurial
opportunities, with evidence at both the regional and organizational levels. In addition
the causal mechanisms of new firm growth are explored, discussing longitudinal case
study research on problem-solving and competence creation in such firms.
Keywords: entrepreneurship, knowledge economy, sources of entrepreneurial
opportunities, new firm formation, new firm growth.
5
Introduction
If the industrial economy ran on coal and iron ore, the fuel of today’s economy is
knowledge.
1
Technologies have always been underpinned by knowledge, but an
economy run on knowledge is characterised by a critical role for information and
communication technology (ICT), a high proportion of knowledge-intensive activity
and intangible capital that amounts to more than tangible capital in the economy’s
capital stock (Atkinson and Court 1998; Foray 2004).
2
The emergence of the knowledge
economy is not confined to high-technology and ICT services; it has spread across all
sectors of market economies since the 1970s.
3
Wealth creation increasingly depends on
the generation and exploitation of knowledge involving not only science and technology
but also knowledge of practice required to create economic value (Gibbons et al. 1994).
That knowledge plays an important role in the economy is not a new idea or finding.
Every economy is based on knowledge of farming, mining, and construction (Mokyr
2002). Knowledge, embodied in people and technology has always been central to
economic development. But only over recent decades has its importance received so
much emphasis (Harris 2001). The OECD economies are more than ever dependent on
the production, distribution and use of knowledge (OECD 1996).
While scholars in the 1950s and 1960s pointed to the economic importance of large
firms (Galbraith 1956; Servan-Schreiber 1968), more recently a shift from the managed
1
In policy terms this is reflected in respectively the European Coal and Steel Community (the
forerunner of the current European Union) and the current Lisbon Strategy of the EU.
2
The OECD (2005) defines the “knowledge based economy” as an expression coined to describe
trends in advanced economies towards greater dependence on knowledge, information and high skill
levels, and the increasing need for ready access to all of these by the business and public sectors.
3
Ironically, this has gone hand in hand with a labour productivity growth slowdown in Europe ever
since, and initially also in the US (Van Ark 2000).
6
economy to the entrepreneurial economy in OECD countries has been identified
(Audretsch and Thurik 2000; 2001). Radical changes in ICT and biotechnology have
created market opportunities that are more effectively developed by new firms than by
established companies. The shift to knowledge-based economic activity is said to be the
driving force underlying the emergence of the entrepreneurial economy (Audretsch and
Thurik 2001).
4
There is an emphasis on individual motivation, new ideas and risk
taking, which render small and new flexible firms critical to economic success.
5
In the
entrepreneurial economy, flexibility and innovation are more important than stability
and control. Policy makers are counting on entrepreneurial initiative to address
contemporary economic problems associated with structural change, including
unemployment and industrial stagnation. Several studies have found that (especially
ambitious) new firms have a positive effect on economic growth in advanced capitalist
economies and to a marked extent in transition economies (Van Stel et al. 2005; Wong
et al. 2005; Acs and Mueller 2006; Stam et al. 2007; Bosma et al. 2006). This is not the
case in developing countries where other mechanisms are currently more important for
economic growth (cf. Bwalya, 2006).
Recently comparative data has been amassed on entrepreneurship and young firm
growth in different countries. Figure 1 shows indicators of entrepreneurship and young
firm growth in several knowledge-based economies. The indicators of ambitious
entrepreneurship and total entrepreneurial activity vary to a large degree (with Japan
having values that are about five times smaller than the US). Within the UK, about 5
4
A reverse causality has also been suggested: entrepreneurship driving the transition towards a
knowledge-based economy (DTI 1998).
5
In the knowledge economy, (innovative) new firms might be more important than small firms in
general (cf. Parker 2001).
7
percent of the adult population is actively preparing a start-up or owns a recently started
(
On this brief elucidation concerning centre for technology management entrepreneurship in the knowledge economy erik stam.
Centre for Technology Management
Entrepreneurship in the Knowledge
Economy
Erik Stam, Elizabeth Garnsey
No: 2007/04, April 2007
Centre for Technology Management Working Paper Series
These papers are produced by the Institute for Manufacturing, at the University of Cambridge
Engineering Department. They are circulated for discussion purposes only and should not be
quoted without the author's permission. Your comments and suggestions are welcome and
should be directed to the first named author.
ISBN 978-1-902546-58-2
Entrepreneurship in the Knowledge Economy
Erik Stam, Elizabeth Garnsey
No: 2007/04, April 2007
3
ENTREPRENEURSHIP IN THE KNOWLEDGE ECONOMY
Erik Stam
*
and Elizabeth Garnsey
Centres for Technology Management and International Manufacturing
Institute for Manufacturing
University of Cambridge
Mill Lane
Cambridge CB2 1RX
United Kingdom
Tel: 44 (0)1223 338183; 44 (0)1223 765601
Fax: 44(0)1223 766400
[email protected]; [email protected]
Erik Stam is an AIM-IPGC Research Fellow in the Department of Engineering, University of Cambridge
and Research Fellow at the Max Planck Institute of Economics (Jena-Germany) and at the Netherlands
Council for Government Policy (The Hague-The Netherlands)
Elizabeth Garnsey is a Reader in Innovation Studies in the Department of Engineering and Judge Institute
of Management Studies, University of Cambridge
*
Corresponding author: [email protected]
4
Abstract
This paper reviews the literature on knowledge as a source of entrepreneurial
opportunities, with evidence at both the regional and organizational levels. In addition
the causal mechanisms of new firm growth are explored, discussing longitudinal case
study research on problem-solving and competence creation in such firms.
Keywords: entrepreneurship, knowledge economy, sources of entrepreneurial
opportunities, new firm formation, new firm growth.
5
Introduction
If the industrial economy ran on coal and iron ore, the fuel of today’s economy is
knowledge.
1
Technologies have always been underpinned by knowledge, but an
economy run on knowledge is characterised by a critical role for information and
communication technology (ICT), a high proportion of knowledge-intensive activity
and intangible capital that amounts to more than tangible capital in the economy’s
capital stock (Atkinson and Court 1998; Foray 2004).
2
The emergence of the knowledge
economy is not confined to high-technology and ICT services; it has spread across all
sectors of market economies since the 1970s.
3
Wealth creation increasingly depends on
the generation and exploitation of knowledge involving not only science and technology
but also knowledge of practice required to create economic value (Gibbons et al. 1994).
That knowledge plays an important role in the economy is not a new idea or finding.
Every economy is based on knowledge of farming, mining, and construction (Mokyr
2002). Knowledge, embodied in people and technology has always been central to
economic development. But only over recent decades has its importance received so
much emphasis (Harris 2001). The OECD economies are more than ever dependent on
the production, distribution and use of knowledge (OECD 1996).
While scholars in the 1950s and 1960s pointed to the economic importance of large
firms (Galbraith 1956; Servan-Schreiber 1968), more recently a shift from the managed
1
In policy terms this is reflected in respectively the European Coal and Steel Community (the
forerunner of the current European Union) and the current Lisbon Strategy of the EU.
2
The OECD (2005) defines the “knowledge based economy” as an expression coined to describe
trends in advanced economies towards greater dependence on knowledge, information and high skill
levels, and the increasing need for ready access to all of these by the business and public sectors.
3
Ironically, this has gone hand in hand with a labour productivity growth slowdown in Europe ever
since, and initially also in the US (Van Ark 2000).
6
economy to the entrepreneurial economy in OECD countries has been identified
(Audretsch and Thurik 2000; 2001). Radical changes in ICT and biotechnology have
created market opportunities that are more effectively developed by new firms than by
established companies. The shift to knowledge-based economic activity is said to be the
driving force underlying the emergence of the entrepreneurial economy (Audretsch and
Thurik 2001).
4
There is an emphasis on individual motivation, new ideas and risk
taking, which render small and new flexible firms critical to economic success.
5
In the
entrepreneurial economy, flexibility and innovation are more important than stability
and control. Policy makers are counting on entrepreneurial initiative to address
contemporary economic problems associated with structural change, including
unemployment and industrial stagnation. Several studies have found that (especially
ambitious) new firms have a positive effect on economic growth in advanced capitalist
economies and to a marked extent in transition economies (Van Stel et al. 2005; Wong
et al. 2005; Acs and Mueller 2006; Stam et al. 2007; Bosma et al. 2006). This is not the
case in developing countries where other mechanisms are currently more important for
economic growth (cf. Bwalya, 2006).
Recently comparative data has been amassed on entrepreneurship and young firm
growth in different countries. Figure 1 shows indicators of entrepreneurship and young
firm growth in several knowledge-based economies. The indicators of ambitious
entrepreneurship and total entrepreneurial activity vary to a large degree (with Japan
having values that are about five times smaller than the US). Within the UK, about 5
4
A reverse causality has also been suggested: entrepreneurship driving the transition towards a
knowledge-based economy (DTI 1998).
5
In the knowledge economy, (innovative) new firms might be more important than small firms in
general (cf. Parker 2001).
7
percent of the adult population is actively preparing a start-up or owns a recently started
(