Working Paper Series,
Research Institute of Industrial Economics

Abstract: This article discusses welfare quasi-markets, a promising yet under-explored area of study in entrepreneurship research. Many countries have implemented quasi-markets to enhance entrepreneurship and innovation in welfare service provision. However, the benefits have often been limited, as Sweden’s experience illustrates. Based on the Swedish experience, we contend that quasi-markets can unlock their innovation potential only under a suitable institutional framework. By analyzing the development of quasi-markets in primary and secondary education and elderly care nursing homes, we demonstrate that competition and profit incentives, though crucial, are insufficient catalysts for sustained innovation in quasi-market contexts. Such markets require epistemically supportive institutions. These institutions should enable users to make knowledgeable choices and motivate entrepreneurial providers to compete and innovate in ways that align with user preferences.

Keywords: Entrepreneurship; Innovation; Quasi-markets; Welfare services; Schools; Nursing homes

JEL-codes: H42; H44; H75; I22; I28; L88; O31

Language: English

25 pages, First version: May 6, 2024. Revised: June 10, 2026. Earlier revisions: June 10, 2025.

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