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The Social Dynamics of Entrepreneurship

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  • William Bygrave
  • Maria Minniti

Abstract

We present a framework describing the interdependence between entrepreneurial decisions at the individual level and the local amount of entrepreneurial activity. We view the entrepreneur as someone who has the ability to perceive and exploit previously unrecognized profit opportunities. His behavior, we argue, produces the conditions for new markets to develop and, as a consequence, new entrepreneurial opportunities are created. Thus, entrepreneurs act as catalysts of economic activity for the entire economy. In other words, we introduce a distinction between the microeconomic effects of entrepreneurial activity within a specific market and its effects at the aggregate level. Specifically, the goal of this paper is to show that the actual rate of entrepreneurship creates a network externality that, by favoring the concentration of a significant quantity of economic activity and by encouraging alertness, also promotes growth. If, indeed, entrepreneurship creates a network externality, then its effect on the aggregate level of activity exceeds the value of each individual entrepreneurial action, and the contribution of the entrepreneurial sector to economic growth is more than proportional to the relative size of the sector itself.

Suggested Citation

  • William Bygrave & Maria Minniti, 2000. "The Social Dynamics of Entrepreneurship," Entrepreneurship Theory and Practice, , vol. 24(3), pages 25-36, April.
  • Handle: RePEc:sae:entthe:v:24:y:2000:i:3:p:25-36
    DOI: 10.1177/104225870002400302
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    References listed on IDEAS

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    1. Neil Churchill & William D. Bygrave, 1989. "The Entrepreneur ship Paradigm (I): A Philosophical Look at Its Research Methodologies," Entrepreneurship Theory and Practice, , vol. 14(1), pages 7-26, October.
    2. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
    3. Maria Minniti & William Bygrave, 1999. "The Microfoundations of Entrepreneurship," Entrepreneurship Theory and Practice, , vol. 23(4), pages 41-52, July.
    4. Brian Arthur, W. & Ermoliev, Yu. M. & Kaniovski, Yu. M., 1987. "Path-dependent processes and the emergence of macro-structure," European Journal of Operational Research, Elsevier, vol. 30(3), pages 294-303, June.
    5. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 501-526.
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