Competition, growth, and entrepreneurship: Productive and unproductive linkages

Competition is one of the central ideas of economic thought and policy. Since Adam Smith, competition has served as a driving engine to foster growth. Implicitly or explicitly, between growth and entrepreneurship, a further link is assumed, in a Schumpeterian way of thinking, namely that (new) swarms of entrepreneurs add to increased growth and prosperity. The problem is that there has been no discussion so far, either in economic theory or in economic policy, about the question of what entrepreneurship really is and which agents have to be defined as entrepreneurs. Instead of coming up with a commonly shared definition of entrepreneurship, economic policy, in particular, proceeds pragmatically by replacing entrepreneurship with self-employment. Accordingly, fostering entrepreneurship means fostering the ratio of self-employment. The paper will shed light on this issue by (i.) referring to the history of ideas in economics with reference to the interpretation of entrepreneurship and by (ii.) referring to empirical labor market data provided by Eurostat for different European countries. The paper will suggest that competition, growth and entrepreneurship each have different linkages, which cannot be treated as simple one-to- one matches as conventionally suggested. The term entrepreneurship includes productive and unproductive elements in society (Baumol 1990) and different linkages exist between growth and prosperity on the one side, and entrepreneurship on the other side. Empirical findings suggest that prosperous economies can show a significantly low ratio of self-employment, whereas countries with a lack of growth and comparatively high ratios of unemployment go hand in hand with high ratios of self-employment. The result is that empirical linkages matter rather more than assumptions, and that one has to link the discussion to a much broader discussion about competition and competition policies.