Working Paper Series,
Research Institute of Industrial Economics

Abstract: We argue that evasive entrepreneurship is an important, although underrated, source of innovation, and provide the first systematic discussion of the con-cept. We define evasive entrepreneurship as profit-driven business activity in the market aimed at circumventing the existing institutional framework by using innovations to exploit contradictions in that framework. We formulate four propositions of evasive entrepreneurship and illustrate them with a number of real life examples, ranging from a secret agreement among Chinese farmers in the 1970s to activities of rides-for-hire startups in the modern sharing economy. We demonstrate that while evasive entrepreneurship can either be productive, unproductive or destructive, it may prevent economic development from being stifled by existing institutions during times of rapid economic change. Furthermore, it can spur institutional change with important welfare effects.

Keywords: Entrepreneurship; Evasion; Innovation; Institutions; Regulation; Self-employment

JEL-codes: L50; M13; O31; P14

Language: English

33 pages, First version: October 22, 2014. Revised: March 31, 2016. Earlier revisions: November 30, 2015.

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Published as

Niklas Elert and Magnus Henrekson, (2016), 'Evasive Entrepreneurship', Small Business Economics, vol 47, no 1, pages 95-113

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