Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 853: Institutional Entrepreneurship: An Introduction

Magnus Henrekson () and Tino Sanandaji ()
Additional contact information
Magnus Henrekson: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Tino Sanandaji: Research Institute of Industrial Economics (IFN), Postal: and University of Chicago

Abstract: In this introductory chapter to a collective volume,* we build on Baumol’s (1990) framework to categorize, catalog, and classify the budding research field that explores the interplay between institutions and entrepreneurship. Institutions channel entrepreneurial supply into productive or unproductive activities, which likely accounts for a great deal of the disparate economic development of nations. What’s more, entrepreneurship is not only influenced by institutions—entrepreneurs often shape institutions themselves. Entrepreneurship abiding by existing institutions is occasionally disruptive enough to challenge the foundations of prevailing institutions. Entrepreneurs also have the opportunity to evade institutions, which tends to undermine the effectiveness of the institutions in question, or cause them to change for the better. Lastly, entrepreneurs can directly alter institutions through innovative political entrepreneurship. Similar to business entrepreneurship, innovative political activity can be either productive or unproductive, depending on the entrepreneurs’ incentives.

Keywords: Entrepreneurship; Innovation; Institutions; Property rights; Regulation; Self-employment

JEL-codes: H32; L50; M13; O31; P14

28 pages, October 7, 2010

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