Innovative Entrepreneurship and Policy: Toward Initiation and Preservation of Growth

  • William J. Baumol
  • Robert E. Litan
  • Carl J. Schramm
  • Robert J. Strom
Part of the Contributions to Economics book series (CE)


A wide range of United States political policies influence the level of innovative entrepreneurial activity in the country, that is the number of new businesses started each year that bring truly new products and ideas to the market. These policies begin with an educational system that fosters a creative, inventive, and educated population with the skills to start new businesses. Immigration policies, too, contribute to an entrepreneurial population by welcoming additional talent. The government also plays an important role in creating incentives for the utilization and commercialization of new products, from rights of property and contract that protect new businesses and patent laws that protect new ideas without creating roadblocks to further innovation, to tax policies that focus on consumption rather than income. Finally, the government can mitigate disincentives for starting new businesses, such as an employer-based health system that discourages potential entrepreneurs from leaving their employment, overly onerous regulations that create burdens for young and small businesses, and a litigious environment that creates more risk for new businesses than is necessary to protect consumers.


Entrepreneurial Activity Initial Public Offering Forum Shopping Entrepreneurship Policy Private Equity Firm 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



The authors gratefully acknowledge the editorial and research assistance of Alyse Freilich and Jared Konczal.


  1. Acs Z et al (2008) Entrepreneurship and urban success: toward a policy consensus. Ewing Marion Kauffman Foundation, Kansas City, MOGoogle Scholar
  2. Alberto, AF, Edward LG (August 1999) Evidence on growth, increasing returns, and the extent of the market. Q J Econ 114:3. The MIT Press, pp 1025–1045. Google Scholar
  3. Anderson S, Platzer M (2006) American made: the impact of immigrants and professionals on US competitiveness.
  4. Arrow KJ et al (1996) Benefit-cost analysis in environmental, health, and safety regulation: a statement of principles. AEI Press, Washington, DCGoogle Scholar
  5. Baumol WJ (1993) Social wants and dismal science: the curious case of the climbing costs of health and teaching. Proc Am Philos Soc 137(4):612–637Google Scholar
  6. Baumol WJ, Knorr K (1961) What price economic growth? Prentice-Hall, Englewood Cliffs, NJGoogle Scholar
  7. Baumol WJ, Litan RE, Schramm CJ (2007) Good capitalism, bad capitalism, and the economics of growth and prosperity. Yale University Press, New Haven, CTGoogle Scholar
  8. Ben-David J, Collins R (1966) social factors in the origins of a new science: the case of psychology. Am Soc Rev 31:451–465CrossRefGoogle Scholar
  9. Bradford D (1969) Balance on unbalanced growth. Zeitschrift ffir NationalSkonomie 29:291–304CrossRefGoogle Scholar
  10. Bruce D (2000) Effects of the United States tax system on transitions into self-employment. Labor Econ7:545–574CrossRefGoogle Scholar
  11. Channon D (1979) Leadership and corporate performance in service industries. J Manage Stud 16:185–201CrossRefGoogle Scholar
  12. Cullen JB, Gordon RH (2002) Taxes and entrepreneurial activity: theory and evidence for the U.S., NBER Working Paper no. 9015, June. Accessible at
  13. Collins OF, Moore DG (1970) The organization makers. New York: Appleton Century Crofts Committee on Capital Markets Regulation (2006) Interim report of the commission on capital markets regulation. November 30
  14. Craig BR, Jackson WE, Thomson JB (2007) Does government intervention in the small-firm credit market help economic performance? FRB of Cleveland policy discussion paper No. 22, August Available at SSRN:
  15. De Rugy V (2007) The SBA’s Justification IOU. Regulation, 30:1, pp 26–34, Spring Available at SSRN.
  16. Dogan M, Pahre R (1990) Creative marginality. innovation at the intersections of social sciences. Westview Press, Boulder, MAGoogle Scholar
  17. Domar ED, Musgrave RA (1944) Proportional income taxation and risk-taking. Q J Econ 58: 388–422CrossRefGoogle Scholar
  18. Dosi G (1988) Sources, procedures, and microeconomic effects of innovation. J Econ Lit 26(3):1120–1171Google Scholar
  19. Drucker PF (1985) Innovation and entrepreneurship: practice and principles. Harper & Row, New York, NYGoogle Scholar
  20. Edge D, Mulkay M (1976) Astronomy transformed. Wiley, New York, NYGoogle Scholar
  21. Fairlie RW (2008) Kauffman index of entrepreneurial activity, 1996–2007. Ewing Marion Kauffman Foundation, Kansas City, MOGoogle Scholar
  22. Feldman DH (1999) The development of creativity. In: Sternberg RJ (ed) Handbook of creativity. Cambridge University Press, Cambridge, pp 169–186Google Scholar
  23. Finke RA (1995) Creative insight and preinventive forms. In: Sternberg, RJ, Davidson JE (eds) The nature of insight. MIT Press, Cambridge, MA, pp 255–280Google Scholar
  24. Freeman RB (2005) Does globalization of the scientific/engineering workforce threaten U.S. economic leadership? NBER Working Paper 11457. http:/
  25. Freeman RB (2006) Investing in the best and brightest: increased fellowship support for american scientists and engineers, Hamilton project discussion paper, The Brookings Institution, Washington, DCGoogle Scholar
  26. Gardner H (1993) Multiple intelligences: the theory in practice. BasicBooks, New York, NYGoogle Scholar
  27. Garrett TA, Wall HJ (2006) Creating a policy environment for entrepreneurs. Cato J Fall 26(3): 525–552Google Scholar
  28. Gentry WM, Hubbard RG (2000) Tax policy and entry into entrepreneurship. Am Econ Rev 90(2):283–287CrossRefGoogle Scholar
  29. Gick ML, Lockhart RS (1995) Cognitive and affective components of insight. In: Sternberg RJ, Davidson JE (eds) The nature of insight. MIT Press, Cambridge, MA, pp 197–228Google Scholar
  30. Gieryn TF, Hirsh RF (1983) Marginality and innovation in science. Soc Stud Sci 13: 87–106CrossRefGoogle Scholar
  31. Glaeser EL, Saiz A (2003) The rise of the skilled city. NBER working paper No. 10191.
  32. Glaeser EL, Kallal HD, Scheinkman JA, Shleifer A (1992) Growth in cities. J Pol Econ 100:6, Centennial Issue. The University of Chicago Press, pp 1126–1152. Google Scholar
  33. Glaeser EL (2007a) Entrepreneurship and the city. National Bureau of Economic Research (NBER) working paperGoogle Scholar
  34. Glaeser EL (2007b) The economics approach to cities. NBER working paper No. 13696, Dec.
  35. Gordon R, Staiger DO, Kane TJ (2006) Identifying effective teachers using performance on the job, Hamilton project white paper, April. The Brookings Institution
  36. Government Accountability Office (2007) Global competitiveness: implications for the Nation’s higher education system, highlights of a GAO forum, January
  37. Gratzer D (2006) The cure: how capitalism can save American health care. Encounter Books, New York, NYGoogle Scholar
  38. Hambrick DC, Mason PA (1984) upper echelons: the organization as a reflection of its top managers. Acad Manage Rev 9:193–206CrossRefGoogle Scholar
  39. Hart DM (ed) (2003) The emergence of entrepreneurship policy: governance, start-ups, and growth in the U.S. knowledge economy. Cambridge University Press, CambridgeGoogle Scholar
  40. Hayes JR (1989) The complete problem solver, 2nd edn. Erlbaum, Hillsdale, NJGoogle Scholar
  41. Hess F (ed) (2006) Educational entrepreneurship: realities, challenges, possibilities. Harvard Education Press, Cambridge, MAGoogle Scholar
  42. Holtz-Eakin D, Rosen HS (eds) (2004) Public policy and the economics of entrepreneurship. MIT Press, Cambridge, MAGoogle Scholar
  43. Jaffe A, Lerner J (2004) Innovation and its discontents: how our broken patent system is endangering innovation and progress, and what to do about it. Princeton University Press, Princeton, NJGoogle Scholar
  44. Johnston MD (2006) The litigation explosion, proposed reforms, and their consequences BYU. J Public Law Fall 21(1):179–207 Google Scholar
  45. Kauffman Foundation (2007) On the road to an entrepreneurial economy. A research and policy guide. Available at
  46. Luchins A (1942) Mechanization in problem solving: the effect of Einstellung. American Psychological Association 54:6, Washington DCGoogle Scholar
  47. Martindale C (1995) Creativity and connectionism. In: Smith SM, Ward TB, Finke RA (eds) The creative cognition approach. MIT Press, Cambridge, MA, pp 249–268Google Scholar
  48. Mayer RE (1995) The search for insight: grappling with gestalt psychology’s unanswered questions. In: Sternberg RJ, Davidson JE (eds) The Nature of Insight. MIT Press, Cambridge, MA, pp 3–32Google Scholar
  49. McCraw TK (2007) Prophet of innovation: Joseph Schumpeter and creative destruction. Harvard University Press, Cambridge, MAGoogle Scholar
  50. McKinsey & Co. (January 2007) Sustaining New York’s and the US’ global financial services leadership.
  51. McLaughlin N (2001) Optimal marginality: innovation and orthodoxy in Fromm’s revision of psychoanalysis. Soc Q 42:271–288CrossRefGoogle Scholar
  52. Moynihan DP (1993) Don’t blame democracy: the socialization of slow-growth jobs. Editorial Page. The Washington Post (June 6):C7Google Scholar
  53. National Academy of Sciences (2006) Rising above the gathering storm: energizing and employing America for a brighter economic future. The National Academy of Sciences, The National Academy of Engineering and The Institute of Medicine Washington, DCGoogle Scholar
  54. National Center on Education and the Economy (2006) Tough choices for tough times: the report of the new commission on the skills of the American workforce. National Center on Education and the Economy, Washington, DCGoogle Scholar
  55. Olson, W, Bernstein D (1996) Loser-pays: where next? Maryland Law Rev 1996 55:1161, pp 1161–1163. Google Scholar
  56. Pigou AC (1912) Wealth and welfare. Macmillan, LondonGoogle Scholar
  57. President’s Advisory Panel on Federal Tax Reform (2005) Simple, fair, and pro-growth: proposals to fix America’s tax system. November.
  58. Saxenian A (1999) Silicon valley’s new immigrant entrepreneurs. Public Policy Institute of California, San Francisco, CAGoogle Scholar
  59. Schramm C (2006) The entrepreneurial imperative: how America’s economic miracle will reshape the world. HaperCollins Publishers, New YorkGoogle Scholar
  60. Schramm C, Litan RE (2008) The growth solution. The American, July/AugustGoogle Scholar
  61. Schuetze H (2000) Taxes, economic conditions and recent trends in male self-employment: a Canada-US comparison. Labor Econ 7:507–544CrossRefGoogle Scholar
  62. Simon HA, Chase WG (1973) Skill in chess. Am Sci 61:393–403Google Scholar
  63. Simonton DK (1995) Foresight in insight? A Darwinian answer. In: Sternberg RJ, Davidson JE (eds) The nature of insight. MIT Press, Cambridge, MA, pp 465–494Google Scholar
  64. Simonton DK (1999a) Creativity as blind variation and selective retention: is the creative process Darwinian? Psychol Inq 10:309–328CrossRefGoogle Scholar
  65. Simonton DK (1999b) Origins of genius. Oxford University Press, New York, NYGoogle Scholar
  66. Swanson D, Baumol WJ (2005) Reasonable and nondiscriminatory (RAND) Royalties, standards selection, and control of market power. Antitrust Law J 73 (1):1–58.Google Scholar
  67. The Battle for Brainpower: a survey of talent, 2006. The Economist, 7 October 7, pp 12–14Google Scholar
  68. U.S. Chamber of Commerce (2007) Commission on the regulation of U.S. Capital markets in the 21st Century: Report and Recommendations.
  69. U.S. Small Business Administration (2010) Frequently asked questions.
  70. U.S. Federal Trade Commission (2003) To promote innovation: The proper balance of competition and patent law and policy. U.S. Federal Trade Commission, Washington, DCGoogle Scholar
  71. U.S. National Research Council (2004) A patent system for the 21st century. National Academies Press, Washington, DCGoogle Scholar
  72. U.S. Patent and Trademark Office (2007) USPTO 2007 Fiscal year-end results demonstrate trend of improved patent and trademark quality: production at all-time record levels. November 15.
  73. U.S. Census Bureau (2006) Characteristics of Business: 2002.
  74. Wadwha V, Saxenian A, Rissing B, Gereffi G (2007) America’s new immigrant entrepreneurs. Master of Engineering Management Program, Duke University and School of Information, University of California at BerkeleyGoogle Scholar
  75. Wertheimer Max (1945/1959) Productive thinking. University of Chicago Press, ChicagoGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • William J. Baumol
    • 1
  • Robert E. Litan
    • 2
    • 3
  • Carl J. Schramm
    • 2
  • Robert J. Strom
    • 4
  1. 1.Berkley Center for Entrepreneurial StudiesHenry Kaufman Management CenterNew YorkUSA
  2. 2.The Ewing Marian Kauffman FoundationKansas CityUSA
  3. 3.BrookingsWashingtonUSA
  4. 4.Ewing Marion Kauffman FoundationKansas CityUSA

Personalised recommendations