Higher economic growth results from increased entrepreneurial activity, regardless of the amount of expenditure on research and development (R&D), argues Moren Lévesque in a recent research article published in the Journal of Business Venturing.
Right: Moren Lévesque
Lévesque, a professor of entrepreneurial studies at York’s Schulich School of Business, describes entrepreneurs as being either research-based or imitative. Research-based entrepreneurs transform invention into marketable products and incur expenditure on R&D. Imitative entrepreneurs, on the other hand, increase product availability and competition by replicating technologies developed elsewhere and, as a result, do not incur R&D expenditure.
Her research demonstrates that in many emerging economies, the presence of a high number of imitative entrepreneurs is sufficient to generate economic growth, in spite of low R&D expenditure. “This research is important right now because the current belief is that only innovation matters, resulting in policy interventions that focus on high-tech since this type of entrepreneurship often yields higher and faster returns. In fact, countries in various stages of development can exploit a variety of entrepreneurial comparative advantages,” says Lévesque.
Understanding the role of entrepreneurship for economic growth is important, according to Lévesque and research co-author Maria Minniti, a professor of entrepreneurship at Southern Methodist University in Dallas, because “governments worldwide are sinking large amounts of tax dollars into R&D funding that may have little, if any, effect on the country’s economic growth.”
“Most literature analyzing the mechanisms and causes of economic growth focuses on the role played by expenditure in R&D and the resulting innovation and technological change,” explains Lévesque. “Historically, most countries with sustained research investments have grown faster than others. In recent years, however, countries with significant R&D expenditure, such as Sweden and Japan, have experienced little or no economic growth. At the same time, countries such as China have shown that significant rates of growth are possible with virtually no R&D expenditure.”