Working Paper Series
Status Quo Institutions and the Benefits of Institutional Deviations
() and Magnus Henrekson
Abstract: We nuance the widely held view that well-functioning
institutions are the ultimate prerequisite for innovation and
entrepreneurship. This is done by putting the spotlight on the role that
formal and informal institutions have in serving the economic status quo,
conserving old habits and incumbent economic interests. Therefore, existing
institutions often act as impediments to entrepreneurship and innovation.
We argue that a common yet underappreciated source of institutional change
arises when individuals deviate from the behavior stipulated by existing
institutions. All types of deviations are certainly not beneficial, but
when they take the form of innovations introduced by entrepreneurs, they
can be a powerful source of economic and institutional change. An
institutional setup should strike a balance between the need for stability
that protects people’s expectations and flexibility and adaptability to
innovations and the ensuing entrepreneurship.
Keywords: Regulation; Norms; Innovation; Entrepreneurship; (follow links to similar papers)
JEL-Codes: L50; M13; O31; (follow links to similar papers)
16 pages, December 8, 2016, Revised March 15, 2017
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- This paper is published as:
Elert, Niklas and Magnus Henrekson, (2017), 'Status Quo Institutions and the Benefits of Institutional Deviations', International Review of Entrepreneurship, Vol. 15, March, No. 1, pages 1-14
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