Abstract
Just as the economy has been besieged by a wave of technological change that has left virtually no sector of the economy untouched, scientific understanding of the innovative process—that is, the manner by which firms innovate, and the impact such technological change has on enterprises and markets—has also undergone a revolution, which, although somewhat quieter, has been no less fundamental. Well into the 1970s, a conventional wisdom about the nature of technological change generally pervaded. This conventional wisdom had been shaped largely by scholars such as Alfred Chandler (1977), Joseph Schumpeter (1942), and John Kenneth Galbraith (1956) who convinced a generation of scholars and policymakers that innovation and technological change lay in the domain of large corporations and that small business would fade away as the victim of its own inefficiencies.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Similar results emphasizing the importance of informal R&D are found by Santarelli and Sterlachinni (1990).
- 2.
For example, Shepherd (1979, 40) concludes that, “Patents are a notoriously weak measure. Most of the eighty thousand patents issued each year are worthless and are never used. Still others have negative social value. They are used as ‘blocking’ patents to stop innovation, or they simply are developed to keep competition out.”
- 3.
Chakrabarti and Halperin (1990) use a fairly standard source of data for US patents issued by the US Office of Patents and Trademarks, the BRS/PATSEARCH online database, to identify the number of inventions patented by over 470 enterprises between 1975 and 1986. Of particular interest is their comparison between the propensity of firms to patent and company R&D expenditures, and a measure not often found in the economics literature the number of published papers and publications contributed by employees of each firm. Not only do they bring together data from a number of rich sources, but they also compare how the relationships between the various measures of innovative activity vary across firm size.
- 4.
- 5.
- 6.
- 7.
- 8.
Fisher and Temin (1973) demonstrated that the Schumpeterian Hypothesis could not be substantiated unless it was established that the elasticity of innovative output with respect to firm size exceeds one. They pointed out that if scale economies in R&D do exist, a firm’s size may grow faster than its R&D activities. Kohn and Scott (1982) later showed that if the elasticity of R&D input with respect to firm size is greater than unity, then the elasticity of R&D output with respect to firm size must also be greater than one.
- 9.
Since we are not interested in arbitrage, prices can be viewed as constant, e.g., monopolistic competition leads to equalized prices on differentiated products within an industry.
References
Acemoglu, D., & Johnson, S. 2005. Unbundling institutions. Journal of Political Economy, 113(5): 949–995.
Acs, Z. J., & Armington, C. 2004. The geographic diversity of new firm formation and human capital. Journal of Urban Economics, 56(2): 244–278.
Acs, Z. J., & Audretsch, D. B. 1987. Innovation, market structure and firm size. Review of Economics and Statistics, 69(4): 567–575.
Acs, Z. J., & Audretsch, D. B. (1988). Innovation in large and small firms: An empirical analysis. American Economic Review, 78(4): 678–690.
Acs, Z. J., & Audretsch, D. B. 1989. Patents as a measure of innovative activity. Kyklos, 42: 171–180.
Acs, Z. J., & Audretsch, D. B. 1990. Innovation and Small Firms. Cambridge, MA: MIT Press.
Acs, Z. J., Anselin L., & Varga, A. 2002. Patents and innovation counts as measures of regional production of new knowledge. Research Policy, 31(7): 1069–1085.
Acs, Z. J., Audretsch, D. B., Braunerhjelm, P., & Carlsson, B. 2009. The knowledge spillover theory of entrepreneurship. Small Business Economics, 32(1): 15–30.
Acs, Z. J., Audretsch, D. B., & Feldman, M. P. (1992). Real effects of academic research. American Economic Review, 82(1): 363–367.
Acs, Z. J., Audretsch, D. B., & Feldman, M. P. 1994. R&D spillovers and recipient firm size. Review of Economics and Statistics, 100(2): 336–367.
Acs, Z. J., & Varga, A. 2002. Geography, endogenous growth and innovation. International Regional Science Review, 25(1): 132–148.
Agarwal, R., Audretsch, D., & Sarkar, M. (2007). The process of creative construction: Knowledge spillovers, entrepreneurship and economic growth. Strategic Entrepreneurship Journal, 1(34): 263–286.
Almeida, P., & Kogut, B. 1997. The exploration of technological diversity and the geographic localization of innovation. Small Business Economics, 9(1): 21–31.
Anselin, L., Varga, A., & Acs, Z. J. 1997. Local geographic spillovers between university research and high technology innovations. Journal of Urban Economics, 42: 422–448.
Anselin, L., Varga, A., & Acs, Z. J. 2000. Geographic and sectoral characteristics of academic knowledge externalities. Papers in Regional Science, 79(4): 435–443.
Arrow, K. J. 1962. Economic welfare and the allocation of resources for invention. In R. R. Nelson (Ed.), The Rate and Direction of Inventive Activity: 609–626. Princeton, NJ: Princeton University Press.
Audretsch, D. B. (1995). Innovation and Industry Evolution. Cambridge: MIT Press.
Audretsch, D. B., & Feldman, M. P. (1996). R&D spillovers and the geography of innovation and production. American Economic Review, 86(3): 630–640.
Audretsch, D. B., & Stephan, P. E. (1996). Company-scientist locational links: The case of biotechnology. American Economic Review, 86(3): 641–652.
Audretsch, D. B. 1989. The Market and the State: Government Policy Towards Business in Europe, Japan, and the U.S. New York: New York University Press.
Baldwin, W. L., & Scott, J. T. 1987. Market Structure and Technological Change. London and New York: Harwood Academic Publishers.
Beise, M., & Licht, G. 1996. Innovationsverhalten der deutschen Wirtschaft. Zentrum fuer Europaeische Wirtschaftsforschung (ZEW), Mannheim, January, unpublished manuscript.
Birch, D. 1981. Who creates jobs? The Public Interest, 65: 3–14.
Bound, J., Cummins, J., Griliches, Z., Hall, B. H., & Jaffe, A. 1984. Who does R&D and who patents?. In Z. Griliches (Ed.), R&D, Patents, and Productivity: 21–54. Chicago, IL: University of Chicago Press.
Braunerhjelm, P., Acs, Z., Audretsch, D. B., & Carlsson, B. 2010. The missing link: The knowledge filter and endogenous growth. Small Business Economics, 34(2): 105–125. DOI 10.1007/s11187-009-9235-1.
Carlsson, B., Acs, Z., Audretch, D., & Braunerhjelm, P. 2009. Knowledge creation, entrepreneurship and economic growth: A historical review. Industry and Corporate Change, 18: 1193–1229.
Caves, R. E. (1998). Industrial organization and new findings on the turnover and mobility of firms. Journal of Economic Literature, 36(4): 1947–1982.
Chakrabarti, A. K., & Halperin, M. R. 1990. Technical performance and firm size: Analysis of patents and publications of U.S. firms. Small Business Economics, 2(3): 183–190.
Chandler, A. D. Jr. 1997. The Visible Hand: The Managerial Revolution in American Business. Cambridge: Harvard University Press.
Chandler, A. 1990. Scale and Scope. Cambridge, MA: Harvard University Press.
Cohen, W. M., & Levin, R. C. 1989. Empirical studies of innovation and market structure. In R. Schmalensee, & R. Willig (Eds.), Handbook of Industrial Organization, Vol. II: 1059–1107. Amsterdam, North Holland.
Cohen, W. M., & Klepper, S. 1991. Firm size versus diversity in the achievement of technological advance. Z. J. Acs, & D. B. Audretsch (Eds.), Innovation and Technological Change: An International Comparison: 183–203. Ann Arbor, MI: University of Michigan Press.
Cohen, W. M., & Klepper, S. 1992. The tradeoff between firm size and diversity in the pursuit of technological progress. Small Business Economics, 4(1): 1–14.
Cohen, W. M., Levin, R. C., & Mowery, D. C. 1987. Firm size and R&D intensity: A reexamination. Journal of Industrial Economics, 35: 543–565.
Comanor, W. S. 1967. Market structure, product differentiation and industrial research. Quarterly Journal of Economics, 81: 639–657.
Connolly, R. A., & Hirschey, M. 1984. R&D, market strucutre and profits: A value based approach. Review of Economics and Statistics, 66: 682–686.
Connolly, R. A., Hirsch, B. T., & Hirschey, M. 1986. Union rent seeking, intangible capital, and the market value of the firm. Review of Economics and Statistics, 68: 567–577.
Dosi, G. 1988. Sources, procedures and microeconomic effect of invention. Journal of Economic Literature, 26: 1120–1171.
Edwards, K. L., & Gordon, T. J. 1984. Characterization of innovations introduced on the U.S. market in 1982. The Futures Group, prepared for the U.S. Small Business Administration under Contract No. SBA-6050-OA-82.
Furman, J. L., Porter, M. E., & Stern, S. 2002. The determinants of national competitive advantage. Research Policy, 31(6): 899–937.
Fisher, F. M., & Temin, P. 1973. Returns to scale in research and development: What does the Schumpeterian hypothesis imply? Journal of Political Economy, 81: 56–70.
FitzRoy, F. R., & Kraft, K. 1990. Innovation, rent-sharing and the organization of labour in the federal republic of Germany. Small Business Economics, 2(2): 95–104.
FitzRoy, F. R., & Kraft, K. 1991. Firm size, growth and innovation: Some evidence from west Germany. In Z. J. Acs, & D. B. Audretsch (Eds.), Innovation and Technological Change: An International Comparison: 152–159. Ann Arbor, MI: University of Michigan Press.
Galbraith, J. K. 1956. American Capitalism: The Concept of Countervailing Power (revised ed.). Boston, MA: Houghton Mifflin.
Gellman Research Associates. 1976. Indicators of international trends in technological innovation, prepared for the National Science Foundation.
Gellman Research Associates. 1982. The relationship between industrial concentration, firm size, and technological innovation, prepared for the Office of Advocacy, U.S. Small Business Administration under award no. SBA-2633-OA-79.
Geroski, P. A. 1995. What do we know about entry. International Journal of Industrial Organization, 13(4): 421–440.
Glaeser, E., Kallal, H., Scheinkman, J., & Shleifer, A. 1992. Growth of cities. Journal of Political Economy, 100: 1126–1152.
Grabowski, H. G. 1968. The determinants of industrial research and development: A study of the chemical, drug, and petroleum industries. Journal of Political Economy, 76(4): 292–306.
Greif, S., & Potkowik, G. 1990. Patente and Wirtschaftszweige: Zusammenfiihrung der Internationalen Patentklassifikation and der Systematik der Wirtschaftszweige. Cologne: Carl Heymanns Verlag.
Greif, S. 1989. Zur Erfassung von Forschungs- and Entwicklungstatigkeit durch Patente. Naturwissenschaften, 76(4): 156–159.
Griliches, Z. 1979. Issues in assessing the contribution of R&D to productivity growth. Bell Journal of Economics, 10(Spring): 92–116.
Griliches, Z. 1990. Patent statistics as economic indicators: A survey. Journal of Economic Literature, 28(4): 1661–1707.
Hall, B. H., Griliches, Z., & Hausman, J. A. 1986. Patents and R&D: Is there a lag? International Economic Review, 27: 265–302.
Harhoff, D., & Licht, G. 1996. Innovationsaktivitaeten kleiner und mittlerer Unternehmen. Baden-Baden: Nomos.
Hellmann, T. 2007. When do employees become entrepreneurs? Management Science, 53(6): 919–933.
Hirschman, A. O. (1970). Exit, Voice, and Loyalty. Cambridge: Harvard University Press.
Hvide, H. 2009. Firm size and the quality of entrepreneurs. Economic Journal, 119(539): 1010–1035.
Jaffe, A. B. 1986. Technological opportunity and spillovers of R&D: Evidence from firms’ patents, profits and market value. American Economic Review, 76: 984–1001.
Jaffe, A. B. 1989. Real effects of academic research. American Economic Review, 79(5): 957–970.
Jaffe, A., Trajtenberg, M., & Henderson, R. 1993. Geography, location of knowledge spillovers as evidence of patent citations. Quarterly Journal of Economics, 108: 483–499.
Jovanovic, B. 1982. Selection and evolution of industry. Econometrica, 50(2): 649–670.
Jovanovic, B. 2001. New technology and the small firm. Small Business Economics, 16(1): 53–55.
Kamien, M. I., & Schwartz, N. L. 1975. Market structure and innovation: A survey. The Journal of Economic Literature, 13: 1–37.
Kleinknecht, A., & Verspagen, B. 1989. R&D and market structure: The impact of measurement and aggregation problems. Small Business Economics, 1(4): 297–302.
Kleinknecht, A. 1987. Measuring R&D in small firms: How much are we missing? Journal of Industrial Economics, 36(2): 253–256.
Kleinknecht, A. 1991. Firm size and innovation: Reply to Scheirer. Small Business Economics, 3(2): 157–158.
Kohn, M., & Scott, J. T. 1982. Scale economies in research and development: The Schumpeterian hypothesis. Journal of Industrial Economics, 30: 239–249.
Konig, H., & Zimmermann, K. F. 1986. Innovations, Market structure and market dynamics. Journal of Institutional and Theoretical Economics, 142(l): 184–199.
Krugman, P. 1991. Geography and Trade. Cambridge: MIT Press.
Kuznets, S. 1962. Inventive activity: Problems of definition and measurement. In R. R. Nelson (Ed.), The Rate and Direction of Inventive Activity: 19–43. Princeton, NJ: National Bureau of Economic Research Conference Report.
Lazear, E. P. 2005. Entrepreneurship. Journal of Labor Economics, 23(4): 649–680.
Levin, R. C., & Reiss, P. C. 1984. Tests of a Schumpeterian model of R&D and market structure. In Z. Griliches (Ed.), R&D, Patents, and Productivity: 175–208. Chicago, IL: University of Chicago.
Levin, R. C., Klevorick, A. K., Nelson, R. R., & Winter, S. G. 1987. Appropriating the returns from industrial research and development. Brookings Papers on Economic Activity, 3: 783–820.
Levin, R. C., Cohen, W. M., & Mowery, D. C. 1985. R&D Appropriability opportunity and market structure: New evidence on the Schumpeterian hypothesis. American Economic Review, 15: 20–24.
Link, A. N., & Bozeman, B. 1991. Innovative behavior in small-sized firms. Small Business Economics, 3(3): 179–184.
Link, A. N., & Rees, J. 1990. Firm size, university based research, and the returns to R&D. Small Business Economics, 2(1): 25–32.
Mansfield, E. 1968. Industrial Research and Technological Change: 83–108. New York, NY: W.W. Norton, for the Cowles Foundation for Research Economics at Yale University.
Mansfield, E. 1981. Composition of R&D expenditures: Relationship to size of firm, concentration, and innovative output. Review of Economics and Statistics, 63: 610–615.
Mansfield, E. 1983. Industrial organization and technological change: Recent empirical findings. In John V. Craven (Ed.), Industrial Organization, Antitrust, and Public Policy: 129–143. The Hague: Kluwer-Nijhoff.
Mansfield, E. 1984. Comment on using linked patent and R&D data to measure interindustry technology flows. In Z. Griliches (Ed.), R&D, Patents, and Productivity: 462–464. Chicago, IL: University of Chicago Press.
Mansfield, E., Romeo, A., Schwartz, M., Teece, D., Wagner, S., & Brach, P. 1982. Technology Transfer, Productivity, and Economic Policy. New York: W. W. Norton.
Moen, J. 2005. Is mobility of technical personnel a source of R&D spillovers? Journal of Labor Economics, 23(1): 81–114.
Mueller, D. C. 1967. The firm decision process: An econometric investigation. Journal of Political Economy, 81(1): 58–87.
National Science Board. 1975. Science Indicators 1974. Washington, D.C.: Government Printing Office.
Nelson, R. R. 1959. The simple economics of basic scientific research. Journal of Political Economy, 67(2): 297–306.
Nelson, J. R. 1993. National Innovation Systems. Cambridge, MA: Harvard University Press.
Oppenlander, K. H. 1990. Investitionsverhalten and Marktstruktur – Empirische Ergebnisse fur die Bundesrepublik Deutschland. In B. Gahlen (Ed.), Marktstruktur and gesamtwirtschaftliche Entwicklung: 253–266. Berlin: Springer Verlag.
Pakes, A., & Griliches, Z. 1980. Patents and R&D at the firm level: A first report. Economics Letters, 5: 377–381.
Pakes, A., & Griliches, Z. 1984. Patents and R&D at the firm level: A first look. In Z. Griliches (Ed.), R&D, Patents, and Productivity: 55–72. Chicago, IL: University of Chicago.
Pakes, A. 1985. On patents, R&D, and the stock market rate of return. Journal of Political Economy, 93: 390–409.
Pakes, A., & Nitzan, S. 1983. Optimal contracts for research personnel, research employment, and the establishment of “Rival Enterprises.” Journal of Labor Economics, 1(3): 345–365.
Parker, S. 2004. The Economics of Self-employment and Entrepreneurship. Cambridge: Cambridge University Press.
Pavitt, K., Robson, M., & Townsend, J. 1987. The size distribution of innovating firms in the U.K.: 1945–1983. The Journal of Industrial Economics, 55: 291–316.
Plummer, L. A., Acs, Z. J., & Fried, C. 2010. A spatial competition model of knowledge spillover entrepreneurship. Norman, OK: Mimeo University of Oklahoma.
Porter, Michael. 1990. The Competitive Advantage of Nations. Cambridge: Harvard University Press.
Rosen, S. 1972. Learning and experience in the labor market. Journal of Human Resources, 7(3): 326–342.
Romer, P. 1990. Endogenous technological change. Journal of Political Economy, 98: S71–S102.
Rothwell, R. 1989. Small firms, innovation and industrial change. Small Business Economics, 1(1): 51–64.
Santarelli, E., & Sterlachinni, A. 1990. Innovation, formal vs. informal R&D, and firm size: Some evidence from Italian manufacturing firms. Small Business Economics, 2(2): 223–228.
Scherer, F. M. 1965a. Firm size, market structure, opportunity, and the output of patented inventions. American Economic Review, 55: 1097–1125.
Scherer, F. M. 1965b. Size of firm, oligopoly and research: A comment. Canadian Journal of Economics and Political Science, 31: 256–266.
Scherer, F. M. 1967. Market structure and the employment of scientists and engineers. American Economic Review, 57: 524–530.
Scherer, F. M. 1983a. Concentration, R&D, and productivity change. Southern Economic Journal, 50: 221–225.
Scherer, F. M. 1983b. The propensity to patent. International Journal of Industrial Organization, 1: 107–128.
Scherer, F. M. 1982. Inter-industry technology flows in the United States. Research Policy, 11: 227–245.
Scherer, F. M. 1984. Innovation and Growth: Schumpeterian Perspectives. Cambridge, MA: MIT Press.
Scherer, F. M. 1991. Changing perspectives on the firm size problem. In Z. J. Acs, & D. B. Audretsch (Eds.), Innovation and Technological Change: An International Comparison: 24–38. Ann Arbor, MI: University of Michigan Press.
Scherer, F. M. 1988. Testimony before the subcommittee on monopolies and commercial law. Committee on the Judiciary, U.S. House of Representatives, February 24.
Schulenburg, J. M. G. von der, & Wagner, J. 1991. Advertising, innovation and market structure: A comparison of the United States of America and the federal republic of Germany. In Z. J. Acs, & D. B. Audretsch (Eds.), Innovation and Technological Change: An International Comparison: 160–182. Ann Arbor, MI: University of Michigan Press.
Schulenburg, J. M. G. von der, & Wagner, J. 1992. Unobservable industry characteristics and the innovation-concentration-advertising maze: Evidence from an econometric study using panel data for manufacturing industries in the FRG, 1979–1986. Small Business Economics, 4(4): 315–326. DOI: 10.1007/BF00388626.
Schumpeter, J. A. 1942. Capitalism, Socialism and Democracy. New York, NY: Harper and Row.
Schwalbach, J., & Zimmermann, K. F. 1991. A poisson model of patenting and firm structure in Germany. In Z. J. Acs, & D. B. Audretsch (Eds.), Innovation and Technological Change: An International Comparison: 109–120. Ann Arbor, MI: University o Michigan Press.
Scott, J. T. 1984. Firm versus industry variability in R&D intensity. In Z. Griliches (Ed.), R&D, Patents and Productivity: 233–248. Chicago, IL: University of Chicago Press.
Shane, S., and Venkataraman, S. 2000. The distinctive domain of entrepreneurship research. Academy of Management Review, 25: 217–2221.
Soete, L. L. G. 1979. Firm size and inventive activity: The evidence reconsidered. European Economic Review, 12: 319–340.
Sutton, J. 1997. Gibrat’s legacy. Journal of Economic Literature, 35: 40–59.
Acknowledgments
Thanks go to Al Link for his thoughtful comments and insights as well as to the suggestions made by a number of other contributors to this volume.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2010 Springer Science+Business Media, LLC
About this chapter
Cite this chapter
Acs, Z.J., Audretsch, D.B. (2010). Knowledge Spillover Entrepreneurship. In: Acs, Z., Audretsch, D. (eds) Handbook of Entrepreneurship Research. International Handbook Series on Entrepreneurship, vol 5. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-1191-9_11
Download citation
DOI: https://doi.org/10.1007/978-1-4419-1191-9_11
Published:
Publisher Name: Springer, New York, NY
Print ISBN: 978-1-4419-1190-2
Online ISBN: 978-1-4419-1191-9
eBook Packages: Business and EconomicsBusiness and Management (R0)