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The Political Economy of Entrepreneurship: An Introduction

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Author Info
Douhan, Robin () (Department of Economics)
Henrekson, Magnus () (Research Institute of Industrial Economics)

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Abstract

In this introductory chapter to a collective volume dealing with the political economy of entrepreneurship,* we argue, based on a suggested unifying framework, that political economy is a fruitful approach to entrepreneurship. The importance of institutions in structuring such an analysis is also emphasized. The introduction also introduces the selected articles and puts them in context. Vital functions of the capitalist economy are ascribed to the productive entrepreneur, but the selected articles also show that the social value of entrepreneurship must be evaluated as it is realized. Three facets of entrepreneurship are claimed to be of particular importance from a political economy perspective: (i) Entrepreneurship is dynamic in the sense that it adapts to the politically determined institutional framework within which it acts. Under propitious circumstances, it can be a powerful engine of growth, but it can also be channelled in unproductive and destructive directions. (ii) Entrepreneurship enters directly into the political system. The close connection to property rights constitutes a link between entrepreneurship and private versus public ownership and redistribution. Under unfavourable institutional circumstances, rent-seeking and predatory entrepreneurship, via the political system, offer greater profit opportunities than the market. (iii) A political economy approach is necessary in order to understand how the political system shapes the institutional setup. Here, it is emphasized that the distribution of political power is partly determined by economic wealth. Hence, it is relevant to broaden the analysis to the effects on wealth creation and wealth redistribution stemming from entrepreneurial activity.

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Publisher Info
Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 688.

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Length: 23 pages
Date of creation: 03 Jan 2007
Date of revision:
Publication status: Published in The Political Economy of Entrepreneurship, Henrekson, Magnus, Douhan, Robin (eds.), 2008, pages xi-xxxi, Edward Elgar.
Handle: RePEc:hhs:iuiwop:0688

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Related research
Keywords: Entrepreneurship; Industrial Policy; Innovation; Property Rights; Regulation; Self-employment;

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Find related papers by JEL classification:
H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
P14 - Economic Systems - - Capitalist Systems - - - Property Rights

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Douhan, Robin & Henrekson, Magnus & Eliasson, Gunnar, 2006. "Israel M. Kirzner: An Outstanding Austrian Contributor to the Economics of Entrepreneurship," Working Paper Series 678, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
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