Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1044: Evasive Entrepreneurship

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

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

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

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