Schumpeterian creative class competition, innovation policy, and regional economic growth

Abstract

We focus on a region that is creative in the sense of Richard Florida. The creative class is broadly composed of existing and candidate entrepreneurs. The general question we analyze concerns the effects of Schumpeterian competition between existing and candidate entrepreneurs on economic growth and innovation policy in this region. We perform four specific tasks. First, when the flow rate of innovation function for the existing entrepreneurs is strictly concave, we delineate the circumstances in which competition between existing and candidate entrepreneurs leads to a unique balanced growth path (BGP) equilibrium. Second, we examine whether it is possible for the BGP equilibrium to involve different levels of R&D expenditures by the existing entrepreneurs. Third, we show how the BGP equilibrium is altered when the flow rate of innovation function for the existing entrepreneurs is constant. Finally, we study the impact that taxes and subsidies on R&D by existing and candidate entrepreneurs have on R&D expenditures and regional economic growth.