Entrepreneurship as an Economic Development Strategy

Here is an interesting read if you are looking for an explanation of why and how entrepreneurship stimulates economic development.

Book chapter by Von Bargen, Patrick; Pages, Erik R.; Freedman, Doris. Entrepreneurship as a state and local economic development strategy, The Emergence of Entrepreneurship Policy: Governance, Start-ups, and Growth in the U.S. Knowledge Economy 2003. 240-259.

Cambridge: Cambridge University Press. ISBN 0521826772.

Abstract: The emergence of entrepreneurship as an economic development strategy at the state and local level in the United States is reviewed. Four "waves" of state and local economic development thinking are identified. In the 1930s and 1940s, first wave officials (particularly in the Southern states) relied on industrial recruitment to revive local economies. In the 1980s, second wave programs responded to the implosion of manufacturing industries by supporting new and existing home-grown businesses. Because the second wave approach spawned a dizzying plethora of government programs, third wave programs laid the burden of development assistance on nonprofits and private organizations in the 1980s and 1990s.

These three waves led to the emergence in the 1990s of a new economic development model based on the concept of entrepreneurship. Shifting the focus of policy-making away from the enterprise as the unit of analysis, entrepreneurship programs drive economic development by creating more and better entrepreneurs. To do so, they encourage policy-makers to create entrepreneurial climates, provide education and training about entrepreneurship, focus on the individual entrepreneur rather than firms, offer assistance to entrepreneurs through private support networks, and nurture only "high-growth" entrepreneurs.

The entrepreneurship approach faces various challenges, including the quest for relevant performance measures and the intrusion of ineffective government programs; at the same time, the entrepreneurship model may thrive if individual entrepreneurs are willing to devote their time and resources to supporting their fellow entrepreneurs.