1.5. The Knowledge Spillover View of Entrepreneurship

Question 1

What role does knowledge play in knowledge spillover theory of entrepreneurship?

Answer 1

• knowledge is seen as an advantage rather than a production factor
• knowledge can be created and commertialised
• universities provide knowledge…:
  1) in the form of academic research: not relevant for the region as it can be easily distributed
  2) in the form of human capital: relevant for entrepreneurial activity in the region, as firms can absob HC after graduation –> however proximity to universities is costly to live –> need to pay higher wages

Question 2

how does entrepreneurship function as an endogenous variable according to Audretsch and the “theory of Endogenous Entrepreneurship”?

Answer 2

• Agents posess knowledge which is exogenous, try to extract the return from knowledge –> E. as an endogenous response to opportunities
• investments in ideas that are not commercialised due to knowledge filter
• New small firms profit from RnD made by universities or larger firms.

Question 3

How does Knowledge as a factor of production differ from other production factors according to Arrow (traditional view)?

Answer 3

• differs from traditional factors as it is
  1) non-excludable: newknowledge automatically spills over, others will also get the new knowledge
  2) more uncertain: new ideas have uncertain Expected Value, greater variance, innovations: hard to tell if it can be realised and how demand is going to be
  3) Higher assymetries: people need a very specific knowledge to evaluate the decision to persue an idea –> may affect the expected value of an idea, high divergences across economic agents

Question 4

What is the information paradox?

Answer 4

• The more people know about an idea, the lower the value gets
• The less people know about an idea, the higher is the uncertainty wheater it can be realised
• -> high value investiment requires disclosure –> lowers the value of the idea again

Question 5

Whats is the knowledge filter?

Answer 5

• difference between new knowledge (idea) and commercialised knowledge (brought into the market)
• create opportunity for entrepreneurship

Question 6

How can agents with knowledge best extract the returns from that knowledge?

Answer 6

• if they work in a firm, which places a lower value on the idea –> new firm
• firm places roughly the same value on the idea –> persue it within the organisation

Question 7

What are the most important results of Audretsch and Lehmann´s study on regional knowledge spillover effects on entrepreneurship?

Answer 7

• larger city –> more firms
• more universities of applied sciences –> more firms
• university output (people) influences location decision of start-ups
• research intense natural sciences universities –> tech start-ups (BUT: social sciences–> no impact)