The Knowledge Society, Entrepreneurship, and Unemployment
Posted: 24 Nov 2009
Date Written: 1998
Abstract
Discusses the role of globalization and the knowledge based economy as causes of increased entrepreneurship and presents some calculations about consequences. In particular, a two-way causation exists between entrepreneurship and unemployment: increased entrepreneurship decreases unemployment while increased unemployment stimulates entrepreneurship. Globalization has led to the demise of the comparative advantage of advanced industrial nations in many traditional industries, such as machine tools, metalworking, textiles, and automobile production. Nevertheless, this demise does not inevitably force a trade-off between employment rates and wage rates; rather the comparative advantage of these countries is moving toward knowledge-based economic activity. Furthermore, knowledge-based jobs cannot easily be relocated to less advanced parts of the world. Entrepreneurship is essential to developing this comparative advantage. Because knowledge-based economic activity is predicated on new ideas and novel technology, such activity is inherently uncertain. As advanced nations move to such an economy, industrial structure and employment patterns will become more fluid and turbulent as new ideas are tried with a mix of successes and failures. Such an economy also promotes human fulfillment as the entrepreneurial economy enables a greater degree of creativity, autonomy, and independence. An analysis of empirical data reveals that entrepreneurship is sensitive to rises in unemployment and serves as a corrective for it. Lastly policy suggestions are made: (1) unlike in a previous era where types and levels of output were selected, modern policymakers should focus on improving knowledge-based inputs, such as research and development and public education; and (2) policymakers should shift their focus from preventing firms from abusing their market power to one of provided financial and technical assistance to new ventures. (CAR)
Keywords: Economic development, Wages & salaries, Unemployment rates, Competitive advantages, Employment patterns, Public policies, Human capital, Knowledge production, Globalization, Knowledge economies
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