Entrepreneurship is critical to the formula of economic long-term success. However, the US has been falling behind.
Many regions, states and countries are facing serious economic problems, like unemployment, dropping commodities prices, environmental damage, and malnutrition. Economists will tell you that, in the long run, a rising standard of living depends on increasing productivity and have pointed to entrepreneurship as a critical substrate to make the reaction flow. The US is experiencing dropping productivity along with others.
But, how do entrepreneurs (those who pursue opportunity with scarce resources who create user-defined value through the deployment of innovation) add to increased productivity?
As a way to explain the equation, researchers have developed an endogenous growth model of entrepreneurship that is able to account for the difference in long-run performance between centrally planned economies and market-oriented ones. They conclude that “Long-run growth rates of output and productivity are determined by the growth of the stock of managerial knowledge, which in turn depends on the share of the population involved in entrepreneurial activities and on the time that spent on those activities.”
Creating a pipeline of entrepreneurs is a key component of increasing the standard of living. Technology, government policies and regulations, and investment serve as catalysts. The basic substrates, though, are entrepreneurs driven by a system that allows them to keep what they earn.
No wonder they make doctors take organic chemistry. It is not done to weed out applicants to medical school after all.