The Effect of Entrepreneurship Capital, Output and Growth on Iran's Manufacturing Industries

The objective of this article is to examine the impact of entrepreneurship on the performance of Iran's manufacturing industries using time series data over the period of 1974-2006. More specifically, entrepreneurship capital measures are calculated and included in the production function of manufacturing industries using a specification of the Cobb-Douglas functional form as a basis for analyzing growth determinants. To evaluate this, two alternative measures of entrepreneurship capital are considered. They comprise self-employments and enterprises that hire labor force.
Cointegration analysis of time series approach is carried out to examine the factors affecting output and growth in manufacturing industries with an emphasis on entrepreneurship indicators. To understand the current state of entrepreneurship and economic situation of the country, a comprehensive review of pertinent statistics related to entrepreneurship, output and growth is examined to find major stylized facts in the economy.
The findings of this paper indicate that entrepreneurship capital is a significant and important factor shaping output and growth in Iran's manufacturing industries. The results confirm that enterprises measure of entrepreneurship has positive and significant impacts on output in both the long run and short run. Therefore, the evidence from this paper points to an additional factor - entrepreneurship capital - that also plays an important role in the production function and growth model in this sector. These results suggest a new direction for policies that focus on instruments to enhance entrepreneurship capital. It may be that policies focusing on enhancing entrepreneurship capital can prove to be more effective than those targeting the more traditional factors, such as capital and labor.