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Productive and Destructive Entrepreneurship in a Political Economy Framework

  • Douhan, Robin

    (Research Institute of Industrial Economics (IFN))

  • Henrekson, Magnus

    ()

    (Research Institute of Industrial Economics (IFN))

Recent research has highlighted the role of institutions in channeling entrepreneurs into activities with positive or negative effects on overall productivity. Embedding central elements from these theories into a political economy framework reveals the bilateral causal relation between entrepreneurs and institutions. Core features of the entrepreneur force us to view its effects on institutions as more than mechanic general equilibrium adjustments. Three analytically separate channels of influence are isolated, analyzed and exemplified. Entrepreneurs influence formal economic institutions through direct involvement in politics, by using their entrepreneurial talent to wield de facto political power and by altering the effect of formal institutions. We propose a parsimonious framework that incorporates these effects as well as the role of institutions in channeling entrepreneurial talent. We use examples from modern history as a real-world context to illustrate our framework.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 761.

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Length: 23 pages
Date of creation: 26 Aug 2008
Date of revision:
Handle: RePEc:hhs:iuiwop:0761
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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  1. Holcombe, Randall G, 2002. " Political Entrepreneurship and the Democratic Allocation of Economic Resources," The Review of Austrian Economics, Springer, vol. 15(2-3), pages 143-59, June.
  2. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  3. A. Chong & C. Calderón, 2000. "Causality and Feedback Between Institutional Measures and Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 69-81, 03.
  4. Quy-Toan Do, 2004. "Institutional trap," Policy Research Working Paper Series 3291, The World Bank.
  5. Sergei Guriev & Andrei Rachinsky, 2005. "The Role of Oligarchs in Russian Capitalism," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 131-150, Winter.
  6. Daron Acemoglu, 1993. "Reward Structures and the Allocation of Talent," CEP Discussion Papers dp0143, Centre for Economic Performance, LSE.
  7. Henrekson, Magnus & Jakobsson, Ulf, 2000. "Where Schumpeter was Nearly Right - The Swedish Model and Capitalism, Socialism and Democracy," Working Paper Series 533, Research Institute of Industrial Economics.
  8. Djankov, Simeon & Qian, Yingyi & Roland, Gérard & Zhuravskaya, Ekaterina, 2006. "Entrepreneurship in China and Russia Compared," CEPR Discussion Papers 5705, C.E.P.R. Discussion Papers.
  9. Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions As The Fundamental Cause Of Long-Run Growth," DOCUMENTOS CEDE 002889, UNIVERSIDAD DE LOS ANDES-CEDE.
  10. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
  11. Oriana Bandiera, 2003. "Land Reform, the Market for Protection, and the Origins of the Sicilian Mafia: Theory and Evidence," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 218-244, April.
  12. Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 893-921, October.
  13. William M. Gentry & R. Glenn Hubbard, 2000. "Entrepreneurship and Household Saving," NBER Working Papers 7894, National Bureau of Economic Research, Inc.
  14. Davis, Steven J. & Henrekson, Magnus, 1995. "Industrial Policy, Employer Size and Economic Performance in Sweden," Working Paper Series 436, Research Institute of Industrial Economics.
  15. Daron Acemoglu & James A. Robinson, 2008. "Persistence of Power, Elites, and Institutions," American Economic Review, American Economic Association, vol. 98(1), pages 267-93, March.
  16. repec:cto:journl:v:24:y:2004:i:3:p: is not listed on IDEAS
  17. Christopher J. Coyne & Peter T. Leeson, 2004. "The Plight of Underdeveloped Countries," Cato Journal, Cato Journal, Cato Institute, vol. 24(3), pages 235-249, Fall.
  18. Gartner, William B., 1990. "What are we talking about when we talk about entrepreneurship?," Journal of Business Venturing, Elsevier, vol. 5(1), pages 15-28, January.
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