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Destructive entrepreneurship in the small business sector: bankruptcy fraud in Sweden, 1830–2010

Author

Listed:
  • Marcus Box

    (Södertörn University)

  • Karl Gratzer

    (Södertörn University)

  • Xiang Lin

    (Södertörn University)

Abstract

Entrepreneurship will not always productive: Baumol (1990, 1993) distinguishes between productive, unproductive, and destructive entrepreneurial activities, and in the last two cases, new values are not created. Setting of from the notion of destructive entrepreneurship and the bankruptcy institute as framework for the empirical analysis, we use long aggregate series on bankruptcies and bankruptcy frauds in Sweden, 1830–2010. We operationalize destructive entrepreneurship with bankruptcy frauds. The bankruptcy institute is not a pure cleansing mechanism; assets can be redistributed by criminal procedure. Thus, a form of destructive entrepreneurship can be conducted within this system. We link bankruptcy frauds to the selection mechanism—the aggregate bankruptcy volume—over time. We cannot establish any direct linkages between the bankruptcy volume and institutional changes. However, and in line with research on bankruptcy diffusion and diffusion of economic crimes, we find that bankruptcy frauds have significant, positive impacts on the bankruptcy volume. Therefore, our results indicate that increases in bankruptcy frauds, destructive entrepreneurship, would affect the economic system.

Suggested Citation

  • Marcus Box & Karl Gratzer & Xiang Lin, 2020. "Destructive entrepreneurship in the small business sector: bankruptcy fraud in Sweden, 1830–2010," Small Business Economics, Springer, vol. 54(2), pages 437-457, February.
  • Handle: RePEc:kap:sbusec:v:54:y:2020:i:2:d:10.1007_s11187-018-0043-3
    DOI: 10.1007/s11187-018-0043-3
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    More about this item

    Keywords

    Bankruptcy; Bankruptcy fraud; Destructive entrepreneurship; Sweden;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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