Globalization and the Rise of the Entrepreneurial Economy

47 Pages Posted: 4 Oct 2007

See all articles by David B. Audretsch

David B. Audretsch

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Mark Sanders

Utrecht University - School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 2007

Abstract

This paper argues that globalization has led to a shift in developed countries from an industrial to an entrepreneurial model of production. Globalization is interpreted as a level shock in the supply of unskilled labor to the world economy, a decrease in the level of political risk associated with outward foreign direct investment (offshoring), and the widespread diffusion of a general purpose technology such as ICT. The impact of these exogenous shocks is then analyzed in a variety expansion model that distinguishes among three types of varieties. Following the life cycle we distinguish among new, mature and offshore production. The above shocks all result in a shift in comparative advantage in developed countries towards new varieties which correspond to the early stage of the product life cycle. Moreover, because entrepreneurs serve as agents that move varieties between life cycle stages, their importance increases due to globalization. The many new opportunities for profit benefit entrepreneurs and skilled labor. By contrast, factors of production employed in the mature stages of the life cycle become less important. Thus, the model explains the emergence of what we label an entrepreneurial economy.

Keywords: globalization, globalisation, entrepreneur

JEL Classification: F01, J31, O1, P0

Suggested Citation

Audretsch, David B. and Sanders, Mark, Globalization and the Rise of the Entrepreneurial Economy (April 2007). Jena Economic Research Paper No. 2007-003, Available at SSRN: https://ssrn.com/abstract=1017761 or http://dx.doi.org/10.2139/ssrn.1017761

David B. Audretsch (Contact Author)

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Mark Sanders

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

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