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Essay text:
The model developed in this paper consists of firms which employ
skilled workers as an important input in technological advancement, but the novel feature here is
the entrepreneur, who is the brain of technological progress. The entrepreneur has to decide to
undertake either imitative or innovative activities, of which decision both affects and is affected by
the country's distance to frontier. Specifically, the entrepreneur needs to have a minimum ability
threshold level in order to carry out innovation. This endogenous threshold level falls as the
economy moves closer to the technological frontier, enabling more entrepreneurs to be engaged in
an innovation-based strategy, and consequently, moving the economy from a technological
structure that is based on imitation of foreign technologies to one where domestic innovation
dominates...
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