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The Interaction of Entrepreneurship and Institutions

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  • Henrekson, Magnus

    ()
    (Research Institute of Industrial Economics (IFN))

  • Sanandaji, Tino

    (Research Institute of Industrial Economics (IFN))

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.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 830.

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Length: 31 pages
Date of creation: 19 Apr 2010
Date of revision:
Publication status: Published as Henrekson, Magnus and Tino Sanandaji, 'The Interaction of Entrepreneurship and Institutions' in Journal of Institutional Economics, 2011, pages 47-75.
Handle: RePEc:hhs:iuiwop:0830

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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Keywords: Entrepreneurship; Innovation; Institutions; Regulation; Self-employment;

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Cited by:
  1. Douhan, Robin & Henrekson, Magnus, 2008. "Entrepreneurship and Second-best Institutions: Going Beyond Baumol’s Typology," Working Paper Series 766, Research Institute of Industrial Economics, revised 27 Aug 2009.
  2. Henrekson, Magnus & Stenkula, Mikael, 2009. "Entrepreneurship and Public Policy," Working Paper Series 804, Research Institute of Industrial Economics.
  3. Michael Fritsch & Sebastian von Engelhardt, 2010. "Who Starts with Open Source? Institutional Choice of Start-Ups in the German ICT Sector," Jena Economic Research Papers 2010-049, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. Roy Thurik & Marcus Dejardin, 2012. "Entrepreneurship and Culture," Post-Print halshs-00943684, HAL.

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