How much credit can be given to entrepreneurship for the unprecedented innovation and growth of free-enterprise economies? This book brings together some of the world's leading economists to tackle this question, and their responses shed light on how free-market economies work - and what policies most encourage their growth.

Preface ix INTRODUCTION by Eytan Sheshinski and Robert J. Strom 1 PART I: INTRODUCTORY: THE MICROECONOMICS AND MACROECONOMICS OF GROWTH Chapter 1: On Macroeconomic Models of Free-Market Innovation and Growth by Robert M. Solow 15 Chapter 2: The Macro-context of the Microeconomics of Innovation by Kenneth J. Arrow 20 PART II: INSTITUTIONAL BASES FOR CAPITALIST GROWTH Introduction and Comments by Michael M. Weinstein 31 Chapter 3: Institutional Bases for Capitalist Growth by Douglass C. North 35 Chapter 4: Capitalism and Economic Liberty: The Political Foundations of Economic Growth by Barry R. Weingast 48 PART III: INNOVATION IN MODERN CORPORATIONS Introduction and Comments by Ying Lowrey 73 Chapter 5: Endogenous Forces in Twentieth-Century America by Nathan Rosenberg 80 Chapter 6: Interfirm Collaboration Networks: The Impact of Network Structure on Rates of Innovation by Melissa A. Schilling and Corey Phelps 100 PART IV: THE CONTINUING ROLE OF INDEPENDENT INNOVATORS AND ENTREPRENEURS Introduction and Comments by Sylvia Nasar 135 Chapter 7: The Small Entrepreneur by Boyan Jovanovic and Peter L. Rousseau 140 Chapter 8: Toward Analysis of Capitalism's Unparalleled Growth: Sources and Mechanism by William J. Baumol 158 PART V: DISSEMINATION OF TECHNOLOGY AND THE PATENT SYSTEM Introduction and Comments by Edward N. Wolff 181 Chapter 9: Patents, Licensing, and Entrepreneurship: Effectuating Innovation in Multi-invention Contexts by Deepak Somaya and David J. Teece 185 Chapter 10: The Market for Technology and the Organization of Invention in U.S. History by Naomi R. Lamoreaux and Kenneth L. Sokoloff 213 PART VI: INNOVATION AND TRADE Introduction and Comments by Yochanan Shachmurove 247 Chapter 11: Innovation and Its Effects on International Trade by Ralph E. Gomory and William J. Baumol 261 Chapter 12: Innovation, Diffusion, and Trade by Jonathan Eaton and Samuel S. Kortum 276 PART VII: FINANCE AND INNOVATION IN THE FREE-MARKET ECONOMY Introduction and Comments by Alan S. Blinder 303 Chapter 13: Radical Financial Innovation by Robert J. Shiller 306 Chapter 14: Finance and Innovation by Burton G. Malkiel 324 PART VIII: TOWARD SOME LESSONS Introduction and Comments by Robert J. Strom 339 Chapter 15: The Economic Performance of Nations: Prosperity Depends on Dynamism, Dynamism on Institutions by Edmund S. Phelps 342 Chapter 16: Pharmaceutical Patenting in Developing Countries and R&D by Eytan Sheshinski 357 Contributors 367 Index 369

"This book brings together an absolutely first-rate group of thinkers, including several Nobel Prize winners, who were invited to a 2003 conference spurred by the publication of William J. Baumol's The Free-Market Innovation Machine. These thought-provoking essays illustrate the potential of Baumol's framework to considerably advance our understanding of what drives entrepreneurship, innovation, and long-term economic growth."—Scott Stern, Northwestern University

"This book brings together an absolutely first-rate group of thinkers, including several Nobel Prize winners, who were invited to a 2003 conference spurred by the publication of William J. Baumol's The Free-Market Innovation Machine. These thought-provoking essays illustrate the potential of Baumol's framework to considerably advance our understanding of what drives entrepreneurship, innovation, and long-term economic growth."—Scott Stern, Northwestern University"This book's remarkable achievement is to gather some of the brightest minds in economics to discuss some of the most important issues in the field—innovation, entrepreneurship, and growth. It is particularly refreshing to see these topics addressed at a variety of levels and from a variety of research perspectives. The combination of microeconomists and macroeconomists, and even economic historians, is a rare instance of communication across the subfields of economics. This impressive book will be useful to both economics generalists and specialists."—Thomas Hellmann, University of British Columbia

This book brings together an absolutely first-rate group of thinkers, including several Nobel Prize winners, who were invited to a 2003 conference spurred by the publication of William J. Baumol's The Free-Market Innovation Machine. These thought-provoking essays illustrate the potential of Baumol's framework to considerably advance our understanding of what drives entrepreneurship, innovation, and long-term economic growth. -- Scott Stern, Northwestern University This book's remarkable achievement is to gather some of the brightest minds in economics to discuss some of the most important issues in the field--innovation, entrepreneurship, and growth. It is particularly refreshing to see these topics addressed at a variety of levels and from a variety of research perspectives. The combination of microeconomists and macroeconomists, and even economic historians, is a rare instance of communication across the subfields of economics. This impressive book will be useful to both economics generalists and specialists. -- Thomas Hellmann, University of British Columbia