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The Interaction of Entrepreneurship and Institutions

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  • Henrekson, Magnus

    (Research Institute of Industrial Economics (IFN))

  • Sanandaji, Tino

    (Research Institute of Industrial Economics (IFN))

Abstract

Previous research, notably Baumol (1990), has highlighted the role of insti-tutions in channeling entrepreneurial supply into productive, unproductive or destructive activities. However, entrepreneurship is not only influenced by institutions—entrepreneurs often help shape institutions themselves. The bilateral causal relation between entrepreneurs and institutions is examined in this paper. Entrepreneurs affect institutions in at least three ways. Entrepreneurship abiding by existing institutions is occasionally disruptive enough to challenge the foundations of prevailing institutions. Entrepreneurs sometimes have the opportunity to evade institutions, which tends to undermine the effectiveness of the institutions, or cause institutions to change for the better. Lastly, entrepreneurs can directly alter institutions through innovative political entrepreneurship. As business entrepreneurship, innovative political activity may be productive or unproductive, depending on the incentives facing entrepreneurs.

Suggested Citation

  • Henrekson, Magnus & Sanandaji, Tino, 2010. "The Interaction of Entrepreneurship and Institutions," Working Paper Series 830, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0830
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    More about this item

    Keywords

    Entrepreneurship; Innovation; Institutions; Regulation; Self-employment;
    All these keywords.

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights

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