1. Presentation by Mark Sanders Slide 1 of 15
Scientists, Entrepreneurship and Growth Theory
Mark Sanders
Tjalling C. Koopmans Institute
Utrecht School of Economics
Max Planck Institute for Economics
Presentation by Mark Sanders Slide 1 of 15
Thursday, October 25th, 2007

2. Presentation by Mark Sanders Slide 2 of 15
Motivation
Growth Theory as it is
Knowledge to Opportunities to Ideas
The Ultimate Source of Growth
The Structure of Scientific (R)evolution
Growth Theory as it should be
Presentation by Mark Sanders Slide 2 of 15
Thursday, October 25th, 2007

3. Presentation by Mark Sanders Slide 3 of 15
Motivation
“It has long been recognized that the entrepreneurial
function is a vital component in the process of economic
growth” , Baumol (1968), p. 65.
Modern Growth Literature…
-VE-models (Romer 1990)
-QL-models (Aghion and Howitt 1991)
-Equivalence (Grossmann and Helpman 1991)
…suggests (corporate) R&D is key to growth.
Presentation by Mark Sanders Slide 3 of 15
Thursday, October 25th, 2007

4. Presentation by Mark Sanders Slide 4 of 15
Growth Theory as it is
Rents in Product Markets
Corporate R&D
New Products
Old Ideas
Presentation by Mark Sanders Slide 4 of 15
Thursday, October 25th, 2007

5. Presentation by Mark Sanders Slide 5 of 15
Introducing Entrepreneurs
Rents in Product Markets
Entrepreneurs
Knowledge Filter ?
New Products
(New) Knowledge ?
Presentation by Mark Sanders Slide 5 of 15
Thursday, October 25th, 2007

6. Presentation by Mark Sanders Slide 6 of 15
Introducing Entrepreneurs
Pieces of Knowledge
+ E. Vision and Talent=
Commercial Opportunity
Presentation by Mark Sanders Slide 6 of 15
Thursday, October 25th, 2007

7. Presentation by Mark Sanders Slide 7 of 15
The Ultimate Source
Knowledge constitutes Ideas/Opportunities
Experience generates pieces of new Knowledge
Science generates pieces of new Knowledge
What drives Scientists to do so?
Reputations Causing Paradigms
Normal Science vs. Scientific Crisis
Presentation by Mark Sanders Slide 7 of 15
Thursday, October 25th, 2007

8. Presentation by Mark Sanders Slide 8 of 15
Scientific (R)evolutions
A Model of Science Driven Growth
where function f(.) is the knowledge filter and nP-n is the
universe of opportunities. New products is then proportional
to the number of unexploited opportunities and depends on
the level of entrepreneurial R&D. This activity is profit driven.
Presentation by Mark Sanders Slide 8 of 15
Thursday, October 25th, 2007

9. Presentation by Mark Sanders Slide 9 of 15
Scientific (R)evolutions
A Model of Scientific Activity
where function g(.) captures the role of entrepreneurial vision
and talent. Opportunities are recognized and combine a
number of scientific ideas. It is therefore positive in the stock
of scientific ideas.
Presentation by Mark Sanders Slide 9 of 15
Thursday, October 25th, 2007

10. Presentation by Mark Sanders Slide 10 of 15
Scientific (R)evolutions
Normal Scientific Activity
f(0)=0, f’(.)>0, f”(.)<0, 0<α<1 and β>1
Presentation by Mark Sanders Slide 10 of 15
Thursday, October 25th, 2007

11. Presentation by Mark Sanders Slide 11 of 15
Scientific (R)evolutions
Crisis Scientific Activity
Alternative Paradigms
Presentation by Mark Sanders Slide 11 of 15
Thursday, October 25th, 2007

12. Presentation by Mark Sanders Slide 12 of 15
Scientific (R)evolutions
Paradigm Switching
θ(t)=ψ(At/Kt)*φ(At)*Pr(KA0>Kt)
Presentation by Mark Sanders Slide 12 of 15
Thursday, October 25th, 2007

13. Presentation by Mark Sanders Slide 13 of 15
Scientific (R)evolutions
Problems I II
III
KIII0 Kt
KII0 At
KI0
Presentation by Mark Sanders Slide 13 of 15
Thursday, October 25th, 2007
Time

14. Presentation by Mark Sanders Slide 14 of 15
Scientific (R)evolutions
Presentation by Mark Sanders Slide 14 of 15
Thursday, October 25th, 2007

15. Presentation by Mark Sanders Slide 15 of 15
A new Growth Theory?
In Short:
With Entrepreneurs centre stage,
Growth dynamics may change!!
Presentation by Mark Sanders Slide 15 of 15
Thursday, October 25th, 2007