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Public-sector entrepreneurship and the creation of a sustainable innovative economy

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National Systems of Entrepreneurship (NSE) are fundamental resource allocation systems driven by opportunity pursuit of individuals through the creation of new ventures. Opportunities for venture creation and its outcomes are regulated by country-specific institutions. In contrast to the institutional emphasis of the National Systems of Innovation (NSI) frameworks, where institutions engender and regulate action, National Systems of Entrepreneurship (NSE) are driven by individuals who act within and interact with an institutional frame. This approach differs from the traditional entrepreneurship literature, where institutions are largely silent.

—Conference on National Systems of Entrepreneurship

Abstract

Economic growth requires innovation that can only occur through entrepreneurial action. Attempts to stimulate such action through central direction and explicit planning such as embodied in a National Systems of Innovation approach are inherently limiting because of an inability to anticipate future actions and consequences. A more fruitful approach is the one embodied in a National Systems of Entrepreneurship (NSE) approach, one that recognizes the uncertainty of the entrepreneurial process and focuses instead on the promulgation of policies through public-sector entrepreneurship to create a more nurturing environment within which entrepreneurial action can spontaneously arise in both the private and the public sectors. This paper develops an NSE-based theoretical model of the entrepreneurial environment that integrates into a functional whole the various subsets of that environment that others have studied and explores the role that NSE-guided public policy can play in improving the entrepreneurial environment for both private-sector and public-sector entrepreneurs. In the private sector, such public policies would focus on enhancing the creative environment, the exchange environment, the incentive and feedback structures, and the access to resources. It is also possible to enhance the entrepreneurial environment in the public sector, though the competing demands of democratic norms make that enhancement more difficult.

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Notes

  1. The idea of an NSI framework, as Freeman (1995) shows in his historical analysis, is quite old and goes back to Friedrich List’s National System of Political Economy in 1841. For an example analysis from an NSI perspective with its emphasis on central direction and explicit planning, see Shapira et al. (2011). While an NSI approach may have some value, Mroczkowski (2014) argues that the approach is ultimately limiting and that a broader, more open approach is needed if innovation is to be more than simply incremental.

  2. The NSE approach with its view of the critical role of the entrepreneur is similar to the entrepreneurial ecosystem approach with its emphasis on the critical role of the individual entrepreneur in operating within a social/institutional context while helping to define that nature of that same context. Stam (2014) provides an overview of the entrepreneurial ecosystem literature.

  3. Szerb et al. (2012) provides a comparison of the two approaches.

  4. J. H. von Thünen provides the earliest characterization of the nature of entrepreneurial profits and their motivating role (Thünen 1826/1960). In that characterization, Thünen was quite explicit that entrepreneurial return is not the return from capital but rather the return from ingenuity and the willingness to confront the risks associated with uncertainty. In many ways, Thünen presages the work of Knight nearly a century later. Oddly, Schumpeter was quite explicit in his belief that risk bearing was not an essential characteristic of the entrepreneur (Schumpeter 1926/1934). It is not clear whether this rejection of the entrepreneur as risk bearer was due to his misunderstanding of Knight’s distinction between risk and uncertainty or to a more fundamental disagreement.

  5. Social networks are also referred to as the social dimension of context in the entrepreneurial literature (Hoang and Antoncic 2003; Welter 2011; Zahra and Wright 2011) and as creative cognition in the psychology literature (Ward et al. 1999; Shalley and Perry-Smith 2008).

  6. Witness, for example, the continuing debates in the USA about appropriate patent policy and about access to capital for startups.

  7. See, for example, Banerjee, Chandrasekhar, Duflo, and Jackson’s (2013) work on the importance of micro financing in developing economies.

  8. Efforts such as the GEM project and the GEDI Index focus almost entirely on indirect public-sector entrepreneurship. Though desirable, engaging in a similar effort for direct public-sector entrepreneurship is a more difficult task given the current state of statistics collected and the difficulty of surveying individuals about the internal structures and constraints associated with engaging in entrepreneurial activity within the public sector.

  9. The knowledge spillover theory of entrepreneurship (Ács et al. 2009; Audretsch and Lehmann 2005) argues that the distinction between established firms (what it refers to as incumbents) and nascent firms (what it refers to as start-ups) is fundamental to understanding the entrepreneurial process.

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Acknowledgments

An earlier version of this paper was presented at the Conference on National Systems of Entrepreneurship at the Zentrum für Europäische Wirtschaftsforschung (ZEW) in Mannheim, Germany. Thanks to the participants of that conference (especially David Audretsch and Sameeksha Desai) for their useful comments and perspectives and to an anonymous referee for a close reading of the paper and a number of valuable suggestions.

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Correspondence to Dennis Patrick Leyden.

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Leyden, D.P. Public-sector entrepreneurship and the creation of a sustainable innovative economy. Small Bus Econ 46, 553–564 (2016). https://doi.org/10.1007/s11187-016-9706-0

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