The Microtheory of Innovative Entrepreneurship

The Microtheory of Innovative Entrepreneurship

The Microtheory of Innovative Entrepreneurship

The Microtheory of Innovative Entrepreneurship

Synopsis

Entrepreneurs are widely recognized for the vital contributions they make to economic growth and general welfare, yet until fairly recently entrepreneurship was not considered worthy of serious economic study. Today, progress has been made to integrate entrepreneurship into macroeconomics, but until now the entrepreneur has been almost completely excluded from microeconomics and standard theoretical models of the firm. The Microtheory of Innovative Entrepreneurship provides the framework for introducing entrepreneurship into mainstream microtheory and incorporating the activities of entrepreneurs, inventors, and managers into standard models of the firm.


William Baumol distinguishes between the innovative entrepreneur, who comes up with new ideas and puts them into practice, and the replicative entrepreneur, which can be anyone who launches a new business venture, regardless of whether similar ventures already exist. Baumol puts forward a quasi-formal theoretical analysis of the innovative entrepreneur's influential role in economic life. In doing so, he opens the way to bringing innovative entrepreneurship into the accepted body of mainstream microeconomics, and offers valuable insights that can be used to design more effective policies. The Microtheory of Innovative Entrepreneurship lays the foundation for a new kind of microtheory that reflects the innovative entrepreneur's importance to economic growth and prosperity.

Excerpt

In Italy, the Antonio Feltrinelli International Prize is the highest
award offered to a non-Italian scientist. The award is decided
and governed by the Accademia Nazionale dei Lincei, the oldest
academic honorary society in the world, an institution founded
in 1604 and of which Galileo Galilei was one of the founders.
In 2005, the Feltrinelli International Prize for Contributions to
Economic and Social Sciences was awarded to Professor William
J. Baumol, a member of the Accademia, at a ceremony in Rome.
At that meeting, Professor Baumol addressed the members of
Lincei, and that lecture, considerably expanded, became the
basis of this book

I was led to begin work on this book in 2005, when I prepared my talk for the award of the Antonio Feltrinelli International Prize for Economic and Social Sciences at the Accademia Nazionale dei Lincei, the oldest of the world's learned societies, in Rome. In connection with this honor, I will always be indebted to my friend Professor Luigi Pasinetti, to whose efforts I must accredit the award, gratitude thereby added to my admiration of his work.

This book can be described as my third try—my once-more reiterated attempt to bring systematic growth theory into the domain of microeconomics, from which it is now largely excluded. As I will argue in the introduction, in terms of the comparative importance of static and dynamic analysis, as evaluated in terms of the welfare implications of microeconomics, the current literature has the matter standing on its head. The really important part of the story of economic well-being is all but banished from the literature. In particular, the near total omission of innovative entrepreneurs and their role is a major element in this curious state of affairs.

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