Entrepreneurship Capital -- Determinants and

We investigate what determines regions' entrepreneurial behavior and the impact of it on regional economic performance. We argue that economic knowledge differs not only from traditional factors of production due to its public goods characteristic but it is also uncertain. In that perspective, the role of entrepreneurship is to take on the corresponding risk by starting up a new firm. This implies knowledge spillovers, hence a positive impact on economic performance. We test this hypothesis using a production function approach using data on German regions. We estimate a two-equation system that regresses on both variables, entrepreneurship and economic performance, simultaneously