Entrepreneurial Enterprises, Large Established Firms and Other Components of the Free-Market Growth Machine

Entrepreneurial Enterprises, Large Established Firms and Other Components of the Free-Market... The paper studies the principal influences accounting for the unprecedented growth and innovation performance of the free-market economies. It indicates that vigorous oligopolistic competition, particularly in high-tech industries, forces firms to keep innovating in order to survive. This leads them to internalize innovative activities rather than leaving them to independent inventors, and turns invention into an assembly-line process. The bulk of private R&D spending is shown to come from a tiny number of very large firms. Yet the revolutionary breakthroughs continue to come predominantly from small entrepreneurial enterprises, with large industry providing streams of incremental improvements that also add up to major contributions. Moreover, these firms voluntarily disseminate much of their innovative technology widely and rapidly, both as a major revenue source and in exchange for complementary technological property of other firms, including direct competitors. This helps to internalize the externalities of innovation and speeds elimination of obsolete technology. Some policy implications for industrialized and developing countries are also discussed. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Entrepreneurial Enterprises, Large Established Firms and Other Components of the Free-Market Growth Machine

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2004 by Kluwer Academic Publishers
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1023/B:SBEJ.0000026057.47641.a6
Publisher site
See Article on Publisher Site

Abstract

The paper studies the principal influences accounting for the unprecedented growth and innovation performance of the free-market economies. It indicates that vigorous oligopolistic competition, particularly in high-tech industries, forces firms to keep innovating in order to survive. This leads them to internalize innovative activities rather than leaving them to independent inventors, and turns invention into an assembly-line process. The bulk of private R&D spending is shown to come from a tiny number of very large firms. Yet the revolutionary breakthroughs continue to come predominantly from small entrepreneurial enterprises, with large industry providing streams of incremental improvements that also add up to major contributions. Moreover, these firms voluntarily disseminate much of their innovative technology widely and rapidly, both as a major revenue source and in exchange for complementary technological property of other firms, including direct competitors. This helps to internalize the externalities of innovation and speeds elimination of obsolete technology. Some policy implications for industrialized and developing countries are also discussed.

Journal

Small Business EconomicsSpringer Journals

Published: Oct 2, 2004

References

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