Research On The Relationship Between Entrepreneurship And Economic Growth

Ever since the theory that innovation is the source of economic growth was firstly noted bySchumpeter in1912to now, there are numerous economic scholars having proved thattechnological progress is the engine of economic growth by mathematical derivations andempirical literatures. But the essential of technological progress is innovation, and innovationcomes from the exploitation and development of knowledge. So knowledge spillover graduallybecame the footstone for the theory of innovation promoting economic progress. However, therewas still a missing link between the knowledge and final products’output besides knowledge filterand industrial production. Then some academics such as Acs and Audretsch brought upentrepreneurship theory based on Schumpeter’s theory and pointed that entrepreneurshipconsidered as conduit for knowledge can reduce the knowledge filter efficiently to be conducive toinnovation thereby promoting economic development. This paper analyzes and points howentrepreneurship impacts innovation and economic growth associating with entrepreneurial theoryand mathematical model and empirical analysis.Firstly, by studying the economic developing history of late19thto middle20thcentury ofwest, this paper tries to analyze the contradiction between Schumpeter’s two marks from theperspective of time background and industrial&scientific development. Then we explain thecomplementary two marks which seems to be contradictive combining with industrial life-cycleand maturity concepts thereby studying the impact of entrepreneurship on innovation andeconomic growth.What’s more, this paper builds an endogenous innovation economic growth model to provethat entrepreneurship, innovation and knowledge have positive impact on economic growth. Basedon Schumpeter’s innovation theory and Creative Destruction model by Aghion and Howitt, thispaper builds a detail flow-process diagram of knowledge transformation and formula ofinnovation in order to study passion arrival rate noted in creative destruction model. We analyzethe detail factors affecting the processes of innovation generating and converting to application in the way of mathematical derivation so as to understand how entrepreneurship and knowledge filteraffect the economic growth, combining with related theories on entrepreneurship, innovation andknowledge. The results show that knowledge filter, economic globalization and entrepreneurshipaffect innovation thereby influencing economy. The stock of knowledge and knowledge elasticitydo have positive impact on economic growth while knowledge filter has negative impact. As aconduit for knowledge filter, entrepreneurship is the key to reduce knowledge filter and topromote knowledge spillover thereby pushing economy forward.Thirdly, this paper build an economic growth model based on entrepreneurship to prove thepositive of entrepreneurship on economic growth. Associating the concepts of technologicalopportunity and intermediate good by Cohen and Levin, this paper introduces entrepreneurshipfactor to build an economic growth model with entrepreneurship in accordance with the idea ofJian Tong, which is based on the theory of innovation by Schumpeter and theory ofentrepreneurship by Acs and Audretsch, and makes a further analysis on the relationship betweenentrepreneurship, innovation and market concentration with defining industrial maturity to provethat the entrepreneurship have positive effect on innovation and even economic growth by meansof mathematical derivation. The results shows that entrepreneurship can reduce knowledge filterand improve the intensity of entrepreneurial activities; the larger the entrepreneurship factor, thefaster the growth of number of industries, the higher the stable growth rate. The emergingindustries caused by entrepreneurship speed up the economic growth.Ultimately, with the CPEA index to measure entrepreneurship, we make use of VAR model tohave an empirical analysis on the relationship between entrepreneurship and economy of ourcountry testify the results of model associating with our national conditions to analyze the realimpact and corresponding reasons of entrepreneurial activities. Meanwhile, we utilize samplingdata to estimate CPEA indexes of three northeastern provinces, Beijing, Jiangsu, Guangdong theserepresentative regions. Contrasting different levels of entrepreneurship of regions with varioussituations and conditions, we offer some suggestions for enterprise managers and policy makersaccording with demands of our economic transformation period and economic development.