Audretsch & Thurik: Sources of growth in ME and EE
11 important questions on Audretsch & Thurik: Sources of growth in ME and EE
Purpose of paper of Audretsch & Thurik
- identify differences EE and ME
- suggest a fundamental shift is taking place, from ME to EE
- differences are based on 14 trade-offs
- which are all source of shifting comparative advantage away from capital and labour, towards knowledge based economic activity
The imporance of location and geography in a world dominated by electronic communication seems paradoxal, but
- there is a distinction between knowledge and information
- cost of transmitting information may be invarient to distance
- cost of transmitting knowledge, especially tacit, rises with distance
Competition and co-operation as complements
vs.
Competition and co-operation as substitutes
- substitutes: firms are vertically integrated and compete in product markets
- co-operation between firms reduces number of competitors
- firms are more vertically independed, and specialized
- co-operation among independent firms replaced internal transactions and generates new knowledge and ideas
- but, there is also high competition for new ideas by the very firms that co-operate in create those ideas
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Targeting inputs vs. Targeting outputs
- relative certainty regarding markets and products, so response policy is to target outcomes and outputs
- based on knowledge, so no longer certain what products should be produced, how they are produces and by whom, so targeting inputs
Risk capital vs. Low-risk capital
- low risk because market is certain
- more venture capital, which is high risk
Local policy vs. National policy
- appropriate locus of policy level is at national level
- source of economic activity is knowledge, which tends to be localized.
- More SE, which are no threat in national markets
Four kinds of flexibility
- technological: emergence of new technologies, as computer controlled machines, facilitate flexibility
- organizational: org. went from mass production to flexible specialization
- demand side: SE have higher marginal production costs then LE, but include lower costs over time as demand fluctuates
- qualitative: ability to respond to qualitative changes in market demands
Jobs and high wages vs. Jobs or high wages
- policy: unemployment could be reduced only at cost of lower wages
- SE generated employment at cost of lower wages
- High employment can be combined with high wages, just as low wages do nog necessarily imply high employment
- SE create both jobs and higher wages
Market exchange vs. firm transaction
- high predictable, so transactions within firms are more efficient
- entry of new firms is important, they provide equilibrating function in market: they resore price and competition
- in uncertain era, market exchange is more efficient
- entry of new firm has different role, more based on new knowledge, less then land, labour and capital
The emergence of EE is a response of 2 fundamental aspects of globalization
- advent of low-cost but high-skilled competion in East Europe and Asia
- Telecommunications revolution, which has greatly reduces the costs of shifting standardized economic activity out of high-cost locations as Europe, to low-cost elsewere
Entrepreneurial Economy (EE)
- newly emerging economy
- deregulation, privatization, labour markey flexibiliy
- advantages arrive from knowledge & innovation
- lose contract with employees
- focus on create environment for success
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