DP3678 Entrepreneurship Capital and Economic Performance

Author(s):	David B Audretsch, Max Keilbach
Publication Date:	January 2003
Keyword(s):	entrepreneurship capital, production function, regional economic performance
JEL(s):	M13, O32, O47
Programme Areas:	Industrial Organization
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=3678

The neoclassical model of the production function, as applied by Robert Solow to build the neoclassical model of growth, linked labour and capital to output. More recently, Romer and others have expanded the model to include measures of knowledge capital. In this Paper we introduce a new factor, entrepreneurship capital, and link it to output in the context of a production function model. This Paper explains what is meant by entrepreneurship capital and why it should influence economic output. A production function model including several different measures of entrepreneurship capital is then estimated for German regions. The results indicate that entrepreneurship capital is a significant and important factor shaping output and productivity. These results suggest a new direction for policy that focuses on instruments to enhance entrepreneurship capital.