Table Of ContentSustaining Entrepreneurship
and Economic Growth
For other titles published in this series, go to
www.springer.com/series/6149
INTERNATIONAL STUDIES IN ENTREPRENEURSHIP
SeriesEditors:
Zoltan J. Acs
George Mason University
Fairfax, VA, USA
David B. Audretsch
Max Planck Institute of Economics
Jena, Germany
and
Indiana University
Bloomington, IN, USA
Max K eilbach (cid:127) J agannadha Pawan Tamvada (cid:127)
David B. Audretsch
Editors
Sustaining Entrepreneurship
and Economic Growth
Lessons in Policy and Industry Innovations
from Germany and India
123
Editors
Max K eilbach Jagannadha Pawan Tamvada
Max Planck Institute of Economics Max Planck Institute of Economics
Jena, Germany Jena, Germany
k eilbach @econ.mpg.de [email protected]
David B. Audretsch
Max Planck Institute of Economics
Jena, Germany
and
Indiana University
Bloomington, IN, USA
[email protected]
Series Editors
Zoltan J. Acs David B. Audretsch
George Mason University Max Planck Institute of Economics
Fairfax, VA, USA Jena, Germany
and
Indiana University
Bloomington, IN, USA
ISBN978-0-387-78694-0 e-ISBN978-0-387-78695-7
DOI: 10.1007/978-0-387-78695-7
LibraryofCongressControlNumber:2008929576
(cid:176)c 2009SpringerScience+BusinessMedia,LLC
Allrightsreserved.Thisworkmaynotbetranslatedorcopiedinwholeorinpartwithoutthewritten
permissionofthepublisher(SpringerScience+BusinessMedia,LLC,233SpringStreet,NewYork,NY
10013,USA),exceptforbriefexcerptsinconnectionwithreviewsorscholarlyanalysis.Useinconnection
withanyformofinformationstorageandretrieval,electronicadaptation,computersoftware,orbysimilar
ordissimilarmethodologynowknownorhereafterdevelopedisforbidden.
Theuseinthispublicationoftradenames,trademarks,servicemarks,andsimilarterms,eveniftheyare
notidentifiedassuch,isnottobetakenasanexpressionofopinionastowhetherornottheyaresubject
toproprietaryrights.
Printedonacid-freepaper
9 8 7 6 5 4 3 2 1
springer.com
Preface
Entrepreneurshiphasbeenrecognizedasamajordeterminantofeconomicgrowthin
mostdevelopedcountries.Increasedentrepreneurialactivityhasresultedinanenvi-
ronment of sustainable economic growth and controlled unemployment in North
America overthe last 20 years. In EuropeandAsia as well, academicresearchers
andpolicymakershaverealizedthepotentialofentrepreneurshiptoimprovegrowth
ratesanddecreaseunemployment.Usually,inindustrializedcountries,thedebateon
“entrepreneurship”revolves around invention and the subsequent creation of new
venturesininnovativeindustries.
Keepinginviewthegrowingrecognitionofentrepreneurshipinthefieldofeco-
nomics and its relevance to both developed and developing economies, the Max
Planck Institute of Economics conducted the First Max Planck India Workshop
jointlywiththeIndianInstituteofScienceinMarch2006.Thiseventevincedcon-
siderableinterestfromacademicsacrosstheworld.Theaimofthisworkshopwas
toreuniteacademicworkonentrepreneurshipthathasbeenconductedinGermany,
intheUSandinIndia,toexplorecommonissuesanddifferencesin thedynamics
ofentrepreneurshipinthesecountries.
Theworkshophasbeenpartofalargerco-operationonscienceandtechnology
betweentheMaxPlanckSocietyandthe IndianDepartmentofScienceandTech-
nologythatwassignedin December2004byProfessorDr.Peter Gruss,President
oftheMaxPlanckOrganizationontheGermansideandProfessorDr.V.S.Rama-
murthy,StateSecretaryattheIndianDepartmentofScienceandTechnologyonthe
Indianside,togetherwiththeGermanChancellorGerhardSchroederandtheIndian
MinisterforScienceandTechnology,KapilSibal.
We gratefully acknowledge the generous financial support of the Max Planck
Society. Dr. Felix Kahle has shown keen interest in the conference and extended
hiswarmsupporttoourendeavorsin organizingthisevent.We wouldalso liketo
thanktheIndianInstituteofScienceforbeingawonderfulpartnerinco-organizing
this event. In particular,we extend our heartfelt gratitude to Professor N. G. Rao,
thethenchairmanofthedepartmentofmanagementstudiesatIISc,andProfessor
M. H. Bala Subrahmanya,for beingwonderfulhosts andco-organizers.We thank
Nicholas Phillipson and Daniel Valen at Springer, for their constant support and
ThiloKleinattheMaxPlanckInstitute,forprovidingvaluableresearchassistance.
Jena, MaxKeilbach
March2008 JagannadhaPawanTamvada
DavidAudretsch
v
Contents
PartI TheoreticalAnalysesofEntrepreneurshipandInnovation
Introduction:EntrepreneurshipandInnovationinGermanyandIndia .. 3
DavidB.Audretsch,MaxKeilbach,andJagannadhaPawanTamvada
1 TheContributionofEntrepreneurshiptoEconomicGrowth ....... 7
MaxKeilbachandMarkSanders
2 EfficientTransferofPublicScientificR&DtoPrivateFirms ....... 27
T.V.S.RamamohanRao
3 Investing in Labor and Technology: Two “Faces” in India.
ComparisonofSMEsinWestBengalandTamilNadu............. 41
MeenakshiRajeev
PartII EmpiricalAnalyses
4 Knowledge Based Entrepreneurship and RegionalEconomic
Performance ............................................... 65
DavidB.Audretsch,WernerBönte,andMaxKeilbach
5 WhatDeterminesSelf-employmentChoice
inIndia?................................................... 77
JagannadhaPawanTamvada
6 EntrepreneurshipandInnovativePoliciesforFinancingSmall
ScaleIndustriesinIndia:AnEmpiricalAnalysis ................. 85
M.H.BalaSubrahmanyaandRumkiMajumdar
7 DemographicsandEntrepreneurship:EvidencefromGermany
andIndia .................................................. 99
MunishKumarThakur,RaveendraChittoor,
andSinnakkrishnanPerumal
vii
viii Contents
8 ComparingEntrepreneurialClimatesofGermanyandIndia:
MoreSimilaritiesthanDifferences? ............................ 111
JagannadhaPawanTamvada
PartIII IndustryStudies
9 VentureCapitalist’sRoleinChoosingEntrepreneurs:AStudy
ofIndianBiotechnologyIndustry .............................. 125
VinishKathuriaandVanditaTewari
10 PublicR&DPolicy:TheRightTurnsoftheWrongScrew?
TheCaseoftheGermanBiotechnologyIndustry ................. 147
AndreasFierandOliverHeneric
11 TechnologicalStrategiesandFirmCharacteristics:AStudy
ofIndianBasicChemicalIndustry ............................. 169
SavitaBhatandK.Narayanan
12 DiversityandtheGeographyofTechnologyEntrepreneurship:
EvidencefromtheIndianITIndustry .......................... 189
FlorianA.Taeube
PartIV Conclusion
13 DynamicsofEntrepreneurshipandEconomicGrowth ............ 207
T.V.S.RamamohanRao
Index .............................................................215
List of Tables
3.1 CertainindicatorsrelatingtotheSSIsector........................ 43
3.2 Man-dayslostduetolock-outsintheindustrialsector............... 49
4.1 Estimationresults:ModelA .................................... 70
4.2 Estimationresults:ModelB .................................... 71
5.1 Descriptivestatistics........................................... 79
5.2 Determinantsofentrepreneurship................................ 80
6.1 FinancialinfrastructureforSSIinIndia .......................... 88
6.2 GrowthofSSI,productionandbankfinance(Rs.billion) ........... 90
6.3 SCBs’lendingasa%ofSSIproduction .......................... 91
6.4 OriginandslopeoftrendlinesforsharesofSCBsadvances
inSSIproduction ............................................. 93
6.5 InfluenceofSCBs’advancesinthepre-liberalizationperiod ......... 94
6.6 InfluenceofSCBs’advancesintheliberalizationperiod ............ 95
7.1 Typesofmigration ............................................101
7.2 Pearsoncorrelationcoefficient ..................................105
7.3 OLSregressionforbothcountriescombined ......................106
7.4 OLSregressionforIndia .......................................107
7.5 OLSregressionforGermany ...................................107
8.1 Summaryofmajordifferences(GermanyandIndia) ................115
8.2 Summaryofmajorsimilarities(GermanyandIndia) ...............117
9.1 PrincipalconcernsofVCsandbanks.............................126
9.2 VCsactionindevelopingcountriescomparedtodevelopedcountries .127
9.3 TrendofVCfundedfirmsinbiotechnologyindustry ...............132
9.4 Descriptivestatisticsforstartups ................................138
9.5 Descriptivestatisticsforlate-stage/existingfirms ..................138
9.6 Factorsaffectingtheprobabilityofchoosingafirm
forVCfunding ...............................................139
9.7 Contingencytable(N=85) ....................................140
9.8 Factorsaffectingtheprobabilityofchoosingalatestagefirm
forVCfunding ...............................................141
9.9 Contingencytable(N=72) ....................................141
ix
x ListofTables
10.1 DescriptivestatisticsoftheGermanbiotechsurvey(1,529firms) .....160
10.2 NumberofBiotechentrepreneursfrom1995till2003according
thelocalembeddednessoffoundersandtheiraffinitytoresearch .....162
10.3 ProbitestimationsonpublicR&Dfunding ........................163
11.1 Variables,symbols,anddefinitionsusedinthestudy ...............176
11.2 Meanandvarianceofvariablesusedintheanalysis ................177
11.3 Thetechnologicalstrategies ....................................178
11.4 Distributionwithrespecttoaffiliation(degree-wise) ................179
11.5 Distribution with respect to affiliations (specific
technological-strategy-wise) ....................................179
11.6 Distributionwithrespecttomarketshareofthefirm(degree-wise) ...180
11.7 Distribution with respectto market share of the firm (specific
technological-strategy-wise) ....................................180
11.8 Distributionwithrespecttoageofthefirm(degree-wise) ...........181
11.9 Distributionwithrespecttoageofthefirm(specifictechnological
strategy-wise) ................................................181
11.10 Distribution with respect to vertical integration of the firm
(degree-wise) ................................................181
11.11 Distributionwithrespecttoverticalintegrationofthefirm(specific
technologicalstrategy-wise) ....................................182
11.12 Distributionwithrespecttoprofitmarginsofthefirm(degree-wise) ..182
11.13 Distribution with respect to profitmarginof the firm (specific
technologicalstrategy-wise) ....................................183
11.14 DistributionbasedonR&D ....................................183
11.15 DistributionoftypeofR&Dwithrespecttofirmcharacteristics ......184
11.16 Correlationmatrixbetweenthevariables .........................184
12.1 FDI,humancapitalandventurecapital,diversityandopenness
inIndianIT ..................................................199
List of Figures
1.1 Equilibriumwagelevel ......................................... 15
1.2 Phasespaceofthedynamicsinthemodel.......................... 17
3.1 Employment(inlakhpersons)andpercentagegrowthofemployment
intheSSIsectorinIndia ........................................ 42
3.2 TotalnumberofSSIunitsovertheyearsinIndia(numbersinlakhs) ... 42
3.3 Pay-offsfortheintermediaryandlabor ............................ 56
4.1 Technicalknowledge,entrepreneurshipcapitalandproductivity
inthemanufacturingsector:ModelA ............................. 71
4.2 Innovationinput(R&D),entrepreneurshipcapitalandproductivity
inthemanufacturingsector:ModelB ............................. 72
6.1 ShareofSCBs’lendinginSSIproduction:Pre-liberalization
andliberalizationperiods ....................................... 92
10.1 Federal fundingby biotechnologyprogrammesin the business
enterprisesector(Germany1973–2003)(sourceBMBF/ZEW) ........152
10.2 Numberoffundedfirms,R&Dprojectsandtotalamountsofpublic
R&D biotech fundingin the business enterprise sector (BMBF
1993–2003)...................................................155
10.3 Newformationofbiotechnologycompanies1990–2003 .............161
xi
