The Interaction of Entrepreneurship and Institutions

Magnus Henrekson () and Tino Sanandaji

No 830, Working Paper Series from Research Institute of Industrial Economics

Abstract: Previous research, notably Baumol (1990), has highlighted the role of insti-tutions in channeling entrepreneurial supply into productive, unproductive or destructive activities. However, entrepreneurship is not only influenced by institutions—entrepreneurs often help shape institutions themselves. The bilateral causal relation between entrepreneurs and institutions is examined in this paper. Entrepreneurs affect institutions in at least three ways. Entrepreneurship abiding by existing institutions is occasionally disruptive enough to challenge the foundations of prevailing institutions. Entrepreneurs sometimes have the opportunity to evade institutions, which tends to undermine the effectiveness of the institutions, or cause institutions to change for the better. Lastly, entrepreneurs can directly alter institutions through innovative political entrepreneurship. As business entrepreneurship, innovative political activity may be productive or unproductive, depending on the incentives facing entrepreneurs.

Keywords: Entrepreneurship; Innovation; Institutions; Regulation; Self-employment (search for similar items in EconPapers)
JEL-codes: L50 M13 O31 P14 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2010-04-19
New Economics Papers: this item is included in nep-cse, nep-ent, nep-reg and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published as Henrekson, Magnus and Tino Sanandaji, 'The Interaction of Entrepreneurship and Institutions' in Journal of Institutional Economics, 2011, pages 47-75.

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Journal Article: The interaction of entrepreneurship and institutions (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0830

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