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Status Quo Institutions and the Benefits of Institutional Deviations

Niklas Elert () and Magnus Henrekson ()

No 1144, Working Paper Series from Research Institute of Industrial Economics

Abstract: We nuance the widely held view that well-functioning institutions are the ultimate prerequisite for innovation and entrepreneurship. This is done by putting the spotlight on the role that formal and informal institutions have in serving the economic status quo, conserving old habits and incumbent economic interests. Therefore, existing institutions often act as impediments to entrepreneurship and innovation. We argue that a common yet underappreciated source of institutional change arises when individuals deviate from the behavior stipulated by existing institutions. All types of deviations are certainly not beneficial, but when they take the form of innovations introduced by entrepreneurs, they can be a powerful source of economic and institutional change. An institutional setup should strike a balance between the need for stability that protects people’s expectations and flexibility and adaptability to innovations and the ensuing entrepreneurship.

Keywords: Regulation; Norms; Innovation; Entrepreneurship (search for similar items in EconPapers)
JEL-codes: L50 M13 O31 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2016-12-08, Revised 2017-03-15
New Economics Papers: this item is included in nep-ent, nep-ino, nep-law and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as Elert, Niklas and Magnus Henrekson, 'Status Quo Institutions and the Benefits of Institutional Deviations' in International Review of Entrepreneurship, 2017, pages 1-14.

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1144

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