Innovation, Entrepreneurship, and Metropolitan Economic Performance

Abstract

The literature suggests that technological advance is the major driver of economic growth, yet how new knowledge translates into superior economic performance is not described by the growth theories. Two recently proposed frameworks, the missing link hypothesis and the knowledge spillover theory of entrepreneurship, describe a mechanism of the relationship between knowledge creation and regional economic performance through entrepreneurs. This study empirically tests these frameworks using the data on professional, scientific, and technical services in U.S. metropolitan areas from 2001 to 2005. The results indicate an intervening role of entrepreneurs in the relationship between patenting activity and job-creating behavior of incumbent companies, thus lending partial support to the missing link hypothesis. The knowledge spillover theory of entrepreneurship is not supported, as greater local knowledge generation does not translate into increased firm formation.