Date Added: Jan 2011
The ability to adjust to structural change is vital to economic development, and entries can be active participants in this process. While the importance of factor reallocations for growth is widely accepted, the role of entrepreneurs in managing these reallocations is rarely, if ever, mentioned in the empirical growth literature. This paper analyzes the role of entrepreneurial activity for adjustments of the sectoral structure and its relevance for regional economic development. The historical framework is the accelerated economic transformation that occurred in industrialized countries during the mid 1970s, resulting in an increasing need to adjust. Based on German data from 1975 to 2002, evidence is presented that sectoral reallocations are an important means for transforming entrepreneurial activity into growth.