Chapter

Innovation and Growth: A Technical or Entrepreneurial Residual?

Pontus Braunerhjelm

in Innovation and Growth

Published in print September 2012 | ISBN: 9780199646685
Published online January 2013 | e-ISBN: 9780191748998 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199646685.003.0013
Innovation and Growth: A Technical or Entrepreneurial Residual?

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Innovation is increasingly viewed as the key to elevate prosperity and secure sustainable long-run growth. The last decades have witnessed a refinement of previous growth models to include also investments in education by individuals and R&D by firms. Better educated individuals and increased expenditure on R&D is then shown to result in innovations and accelerated growth. The issues discussed in this chapter refer to how innovative opportunities arise and are exploited, whether the normative conclusions of contemporary growth models are derived from a realistic micro-economic setting, and suggestions as to how these models can be improved in order to provide appropriate guidance for policy-makers. More precisely, there seems to be a missing link between the production of knowledge and its conversion to societal economic value. Whereas the neoclassical growth model attributed knowledge production to an exogenous ‘technical residual’, current knowledge based growth models assume the diffusion of to take place exogenously or can be attributed an ‘entrepreneurial residual’.

Keywords: growth model; R&D; knowledge; entrepreneurial residual; technical residual

Chapter.  11010 words.  Illustrated.

Subjects: Financial Markets

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