1. Might standard wisdom that only innovation matters for economic growth be mistaken? Historically, countries with sustained R&D expense have grown faster than others But, in recent years, some countries with…  significant R&D expense have faced little/no growth  others with virtually no R&D expense have faced significant growth

2. Entrepreneurs & Economic Growth  Entrepreneurs are the lubricant at the core of the growth process  The presence of entrepreneurs is a necessary condition for growth  But entrepreneurship cannot be reduced to technological innovation  And growth can take place even in the absence of R&D expenditure

3. Entrepreneurial Types  Entrepreneurs are arbitragers who incur upfront costs in the hope of realizing profits  They can be imitative or research-based  All incur the expense necessary to setup and operate the business  Research-based ones, unlike imitative ones, incur R&D costs  as their goods enjoy a (limited) monopoly position

4. Yet both Types Contribute to Technological Innovation  Research-based entrepreneurs contribute directly  Imitative entrepreneurs contribute indirectly by threatening the rent of the research-based ones and giving them incentives to continue innovating to stay ahead of competition

5. Impact of Imitation on Economic Growth  Increasing the imitation rate increases growth if  cost of innovation is relatively high, and  research-based and imitative entrepreneurs exhibit different levels of productivity  In many poor or less developed countries, R&D is costly and unproductive  imitative entrepreneurship can promote growth

6. 0 1 Economic Growth zero growth positive growth negative growth Entrepreneurial Types more R&D more imitation 0 1 m 1 - m m = % of imitative entrepreneurs in the entrepreneurial labor force 1 – m = % of research-based entrepreneurs

7.  When IP laws are not enforced, does it reduce or augment research-based entrepreneurship?  lack of IP laws eliminates the advantage enjoyed by research-based over imitative entrepreneurs  In our model, the imitation rate would increase  The question then becomes: When IP laws are not enforced and imitative e-ship increases relative to research-based e-ship, what happens to growth?

8. Policy Implications  Most policy intervention focuses on high-tech because it often yields higher/faster returns  Focus on R&D may distract policy makers (& resources) from imitative entrepreneurship when beneficial  Governments worldwide are sinking capital in the pursuit of entrepreneurial policies that may have little effect on the conditions of a country

9. Next: The Role of Institutions  If entrepreneurs are crucial for growth, it is important to understand what institutions are more conducive to entrepreneurship  Individuals act very differently under different sets of institutions  Institutions determine the relative payoffs to various opportunities and direct entrepreneurs toward those activities with the highest payoffs