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Incentivizing Innovative Entrepreneurship in Quasi-Markets: Theory and Evidence from Sweden’s Schools and Nursing Homes

Author

Listed:
  • Elert, Niklas

    (Institute of Retail Economics (HFI))

  • Henrekson, Magnus

    (Research Institute of Industrial Economics (IFN))

Abstract

This article discusses welfare quasi-markets, a promising yet under-explored area of study in entrepreneurship research. Many countries have implemented quasi-markets to enhance entrepreneurship and innovation in welfare service provision. However, the benefits have often been limited, as Sweden’s experience illustrates. Based on the Swedish experience, we contend that quasi-markets can unlock their innovation potential only under a suitable institutional framework. By analyzing the development of quasi-markets in primary and secondary education and elderly care nursing homes, we demonstrate that competition and profit incentives, though crucial, are insufficient catalysts for sustained innovation in quasi-market contexts. Such markets require epistemically supportive institutions. These institutions should enable users to make knowledgeable choices and motivate entrepreneurial providers to compete and innovate in ways that align with user preferences.

Suggested Citation

  • Elert, Niklas & Henrekson, Magnus, 2024. "Incentivizing Innovative Entrepreneurship in Quasi-Markets: Theory and Evidence from Sweden’s Schools and Nursing Homes," Working Paper Series 1489, Research Institute of Industrial Economics, revised 10 Jun 2026.
    • Handle: RePEc:hhs:iuiwop:1489
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    References listed on IDEAS

    as
    1. Nicholas Bloom & John Van Reenen & Heidi Williams, 2019. "A Toolkit of Policies to Promote Innovation," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 163-184, Summer.
    2. Elert, Niklas & Henrekson, Magnus, 2017. "Entrepreneurship and Institutions: A Bidirectional Relationship," Working Paper Series 1153, Research Institute of Industrial Economics, revised 05 May 2017.
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    6. Sarah R. Cohodes & Katharine S. Parham, 2021. "Charter Schools’ Effectiveness, Mechanisms, and Competitive Influence," NBER Working Papers 28477, National Bureau of Economic Research, Inc.
    7. Bylund, Per L. & McCaffrey, Matthew, 2017. "A theory of entrepreneurship and institutional uncertainty," Journal of Business Venturing, Elsevier, vol. 32(5), pages 461-475.
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    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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