November 2014

IZA DP No. 8652: The Continued Search for the Solow Residual: The Role of National Entrepreneurial Ecosystem

This paper introduces a new concept in addition to the traditional measures of stocks of capital, labor, human capital and knowledge, to understand the Solow Residual: National Entrepreneurial Ecosystem (NEE). The NEE construct is based on a methodology that combines institutions and human agency into an interdependent system, applying the configuration theory. We argue that NEE affects the efficiency by which inputs are turned into outputs shifting the production function. We use data from a representative global survey and institutional sources to test the model for a cross section of 62 counties over the period 2006-2010 to test this proposition.