Entrepreneurship, experimentation and innovation

Entrepreneurship is considered an important driver of any innovation system as entrepreneurs provide new goods and services to the market and spur innovation among incumbent businesses. The design of entrepreneurship policies has been debated extensively. In formulating policies, one of the major questions that emerges is whether policies should promote the entry of more entrepreneurs into the market, and if yes, which type of entry should be promoted, and how can it be implemented? On the one hand, excess entry can lead to a significant waste of resources because the majority of new entrepreneurs fail within a short period, and very few achieve the societal goal of high growth and job creation. On the other hand, focusing on promoting only attractive entrepreneurs, from society’s point of view, might be an impossible exercise. Recently a different rationale for entrepreneurship policy has been suggested, arguing that entrepreneurship is largely about experimentation, where ideas are carried from firm to firm by individuals, despite failures along the way. This chapter discusses these policy directions, reviews the recent literature and points to the future direction of entrepreneurship policy.