Dr. Maria Minniti of SMU Cox School of Business presentation of January 30, 2012 on entrepreneurs, growth and cities. For the Series "D" panel on "Prospects for Cities."

1. Entrepreneurship and Economic Growth
Maria Minniti
Southern Methodist University Cox School of Business
DallasCFR, Janaury 2012

2. A pop quiz

3. A pop quiz
• Do you think entrepreneurship matters for
economic growth?

4. A pop quiz
• Do you think entrepreneurship matters for
economic growth?
Yes

5. A pop quiz
• Do you think entrepreneurship matters for
economic growth?
Yes
• How does entrepreneurship contribute to
economic growth?

6. A pop quiz
• Do you think entrepreneurship matters for
economic growth?
Yes
• How does entrepreneurship contribute to
economic growth?
The answer to this question is complex and far
from trivial

7. What do we know?
• Entrepreneurship matters for economic growth
• Economic growth matters for entrepreneurship
(Opportunities in US and Dominican Republic are different)
• Entrepreneurship is a human universal
• Productive, unproductive and destructive
entrepreneurship
• Let’s look at some facts

8. Percentage of adultp population between 18-64 years
0%
5%
10%
15%
20%
25%
30%
Hungary
Japan
Belgium
Sweden
Slovinia
Netherlands
Denmark
Italy
Finland
South Africa
Austria
France
Germany
Spain
Mexico
Switzerland
Croatia
United Kingdom
Greece
Early-Stage Entrepreneurs by Country
Latvia
Singapore
Norway
Canada
Argentina
Ireland
Iceland
Australia
Chile
Brazil
United States
China
Jamaica
(Source: GEM Executive Report 2009)
New Zealand
Thailand
Venezuela

9. Prevalence rates of
early-stage
entrepreneurial
activity: city versus
country
Source: Z. Acs, N. Bosma and R.
Sternberg. “Entrepreneurship in World
Cities” in The Dynamics of
Entrepreneurship, M. Minniti, (ed.)
2011, Oxford University Press.

10. Prevalence rates of early-stage entrepreneurship
Source: Data are from Z. Acs, N. Bosma and R. Sternberg. “Entrepreneurship in
World Cities” in The Dynamics of Entrepreneurship, M. Minniti, (ed.) 2011,
Oxford University Press.

11. Entrepreneurship in urban contexts
The vast majority of cities exhibit more entrepreneurship than
the rest of their countries
WHY? (The answer has implicit policy implications)
Jacobs’ urban externalities
The more intensive local competition among firms is, the higher regional
economic growth. Heterogeneity, not specialization in sectoral-regional
clusters, is seen as the most important determinant of growth.
Agglomeration and technological change
Technological change is the most important factor in long-run macroeconomic
growth because of knowledge spillovers. Thus, spatial proximity is an
important factor in innovation is strongly supported in the literature.
Creativity and the ‘geography of talent’ hypothesis
Cultural and ethnic diversity attract creative and adaptable people. Adaptable
people are better equipped to recognize opportunities and to create a self-
enforcing intraregional process of economic growth.

12. Entrepreneurship and network externalities
Source: M. Minniti. 2005.
Entrepreneurship and network
externalities. Journal of Economic
Behavior and Organization.

13. So what promotes entrepreneurship?
- Entrepreneurship is influenced significantly by network externalities
- Cities are complex systems from which a variety of network
externalities emerge (more than in non-urban contexts)
- Externalities facilitate entrepreneurs’ ability to develop a
knowledge advantage
- Entrepreneurs are people who deviate from the norm
- Externalities may be positive or negative
- Governments can promote underlying conditions leading to
externalities conducive to productive entrepreneurship
- Governments don’t have a knowledge advantage
- Policies based on a incorrect understanding of the nature of
entrepreneurship are costly and have little if any effect on the
economy
• GOVERNMENTS CANNOT PICK WINNERS

14. To Sum Up:
- Entrepreneurship is a human universal
- Entrepreneurship is a necessary condition for growth
- Cities are more entrepreneurial than countries
- Cities are more entrepreneurial than countries because of
a web of network externalities
- Only positive externalities lead to productive
entrepreneurship
- Entrepreneurship is a bottom up phenomenon based
on specialized knowledge
- Entrepreneurship policies suffer from non-computability
issues
- Even local governments cannot pick winners
- Policies can promote productive entrepreneurship (as
opposed to other forms of entrepreneurship)

15. Thank you