Scientists Entrepreneurship and Growth Theory Mark Sanders Tjalling

Scientists, Entrepreneurship and Growth Theory Mark Sanders Tjalling C. Koopmans Institute Utrecht School of Economics Max Planck Institute for Economics m. sanders@econ. uu. nl Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 1 of 15

Motivation Growth Theory as it is Knowledge to Opportunities to Ideas The Ultimate Source of Growth The Structure of Scientific (R)evolution Growth Theory as it should be Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 2 of 15

Motivation “It has long been recognized that the entrepreneurial function is a vital component in the process of economic growth” , Baumol (1968), p. 65. Modern Growth Literature… -VE-models (Romer 1990) -QL-models (Aghion and Howitt 1991) -Equivalence (Grossmann and Helpman 1991) …suggests (corporate) R&D is key to growth. Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 3 of 15

Growth Theory as it is Rents in Product Markets Corporate R&D New Products Old Ideas Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 4 of 15

Introducing Entrepreneurs Rents in Product Markets Entrepreneurs Knowledge Filter New Products (New) Knowledge Presentation by Mark Sanders Thursday, October 25 th, 2007 ? ? Slide 5 of 15

Introducing Entrepreneurs Pieces of Knowledge + E. Vision and Talent= Commercial Opportunity Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 6 of 15

The Ultimate Source Knowledge constitutes Ideas/Opportunities Experience generates pieces of new Knowledge Science generates pieces of new Knowledge What drives Scientists to do so? Reputations Causing Paradigms Normal Science vs. Scientific Crisis Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 7 of 15

Scientific (R)evolutions A Model of Science Driven Growth where function f(. ) is the knowledge filter and n. P-n is the universe of opportunities. New products is then proportional to the number of unexploited opportunities and depends on the level of entrepreneurial R&D. This activity is profit driven. Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 8 of 15

Scientific (R)evolutions A Model of Scientific Activity where function g(. ) captures the role of entrepreneurial vision and talent. Opportunities are recognized and combine a number of scientific ideas. It is therefore positive in the stock of scientific ideas. Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 9 of 15

Scientific (R)evolutions Normal Scientific Activity f(0)=0, f’(. )>0, f”(. )<0, 0<α<1 and β>1 Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 10 of 15

Scientific (R)evolutions Crisis Scientific Activity Alternative Paradigms Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 11 of 15

Scientific (R)evolutions Paradigm Switching θ(t)=ψ(At/Kt)*φ(At)*Pr(KA 0>Kt) Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 12 of 15

Scientific (R)evolutions Problems I II III KIII 0 Kt KII 0 At K I 0 Time Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 13 of 15

Scientific (R)evolutions Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 14 of 15

A new Growth Theory? In Short: With Entrepreneurs centre stage, Growth dynamics may change!! Presentation by Mark Sanders Thursday, October 25 th, 2007 Slide 15 of 15