Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1426: Entrepreneurship and Regulatory Voids: The Case of Ridesharing

Amanda Deerfield and Niklas Elert ()
Additional contact information
Amanda Deerfield: Economics Department, Postal: St. Mary’s College of Maryland, 47646 College Drive, St. Mary's City, MD 20686
Niklas Elert: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Abstract: Formal institutions, e.g., regulations, are considered crucial determinants of entrepreneurship, but what enables regulatory change when there is a regulatory void, meaning entrepreneurship clashes with existing regulations? Drawing on public choice theory, we hypothesize that regulatory freedom facilitates the introduction of legislation to fill such voids. We test this hypothesis using unique data documenting the time for ridesharing to become legalized at the state level across the United States following its local (and often illegal) rollout. Results suggest states with greater regulatory freedom passed ridesharing legislation quicker, highlighting an underappreciated way that extant regulatory freedom facilitates the accommodation of entrepreneurship.

Keywords: Entrepreneurship; Innovation; Regulation; Institutional change; Institutional voids; Institutional entrepreneurship; Sharing economy; Economic freedom; Survival analysis

JEL-codes: C21; O31; R49

Language: English

33 pages, March 24, 2022

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