Scandinavian Working Papers in Economics
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Research Institute of Industrial Economics (IFN) Working Paper Series

No 1128:
The Entrepreneurial Rent: The Value of and Compensation for Entrepreneurship

Magnus Henrekson () and Mikael Stenkula ()

Abstract: The surplus that is created in a successful entrepreneurial venture is much higher than the profit corresponding to the risk-adjusted market rate of return. The part of the surplus that exceeds this level may be enoted “entrepreneurial rent.” Such rents normally disappear in the long run but so-called isolating mechanisms ensure that these rents persist in the short or medium run. Entrepreneurial rents arise when successful entrepreneurship is exercised and entrepreneurial firms create and successfully commercialize something new and unique. The presence of and search for entrepreneurial rents is a prerequisite for the innovations and structural change required to generate economic growth. High ex post compensation for successful entrepreneurship cannot be taxed harshly without affecting entrepreneurs’ willingness to supply effort.

Keywords: Entrepreneurship; Economic rent; Entrepreneurial rent; Innovation; Imitation; (follow links to similar papers)

JEL-Codes: D51; J30; L26; O31; (follow links to similar papers)

22 pages, June 16, 2016, Revised March 2, 2017

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This paper is published as:
Henrekson, Magnus and Mikael Stenkula, (2017), 'The Entrepreneurial Rent: The Value of and Compensation for Entrepreneurship', Journal of Entrepreneurship and Public Policy, Vol. 6, No. 1, pages 11-25

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