Entrepreneurship and economic freedom

Entrepreneurship is widely thought to be positively related to economic freedom. In fact, social scientists have long argued that the two are mutually reinforcing. However, although this is often true, the relationship is more nuanced than is implied by such a simple account. To help understand their interaction more fully, this chapter examines theoretical and empirical work on entrepreneurial behavior and economic freedom (and the lack thereof). We define entrepreneurship broadly as judgmental decision-making about the use of scarce resources in production under conditions of uncertainty. We also contrast a variety of alternative concepts and theoretical frameworks for analyzing the relationship between entrepreneurship and economic freedom, including occupational choice, new venture, alertness, innovation, and judgment views. Based on these frameworks, we then explore the empirical literature on entrepreneurship and economic freedom. We pay particular attention to the role of institutions in the entrepreneurial process. We conclude with a discussion of some opportunities for future research.