Entrepreneurs and Economic Selection: An empirical test of Schumpeterian competition

The paper discusses Schumpeter's models of competition and then attempts to identify the Mark I model empirically. The results are that entrepreneurial activity is important in young sectors, as expected, but also often in high-tech sectors and in many service sectors. The relevance of the Mark I model for competition in service sectors is seen as particularly interesting, as the Mark I model thus provides a framework for future analysis of competition in sectors that are very poorly described by the focus on production, goods and quantities of most traditional theory. The selection aspect of Schumpeter's models is also mapped and it is shown that the traditional interpretation of selection as a source of allocative efficiency is at most applicable to input markets in manufacturing sectors. In output markets and in service sectors in general selection is a more dynamic phenomenon where resources are allocated not towards the most productive firms but to the firms with the greatest growth of productivity.