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Entrepreneurship and Economic Development: What is the Difference Between Austrian and New Institutional Approaches?

  • Ladislava Grochová
  • Tomáš Otáhal

What is the role of entrepreneurship in economic development from the perspective of neo-Austrian and new institutional economics and what is the difference between these approaches? Neo-Austrian economists claim that economic development is caused by entrepreneurial discovery. New institutional economists argue that structure of incentives determined by the institutional environment provides a guideline for entrepreneurial decision-making. Hence, an institutional environment that rewards rent-seeking does not provide opportunities for economic development. In this paper we offer a comparison of these approaches to show that both entrepreneurial discovery and institutional environment are closely related. Moreover, with the comparison we demonstrate that entrepreneurial decision-making plays more important role in economic development when an institutional change is taken into account.

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Article provided by University of Economics, Prague in its journal Politická ekonomie.

Volume (Year): 2010 (2010)
Issue (Month): 5 ()
Pages: 623-640

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Handle: RePEc:prg:jnlpol:v:2010:y:2010:i:5:id:751:p:623-640
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  1. Alchian, Armen A. & Demsetz, Harold, 1973. "The Property Right Paradigm," The Journal of Economic History, Cambridge University Press, vol. 33(01), pages 16-27, March.
  2. North, Douglass C, 1994. "Economic Performance through Time," American Economic Review, American Economic Association, vol. 84(3), pages 359-68, June.
  3. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
  4. Israel M. Kirzner, 1997. "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 60-85, March.
  5. Knight, Frank H, 1942. "Profit and Entrepreneurial Functions," The Journal of Economic History, Cambridge University Press, vol. 2(S1), pages 126-132, December.
  6. Williamson, Oliver E, 1971. "The Vertical Integration of Production: Market Failure Considerations," American Economic Review, American Economic Association, vol. 61(2), pages 112-23, May.
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