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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

Many countries have implemented quasi-markets to enhance entrepreneurship and innovation in welfare service provision. However, the benefits have generally been limited; this can also be observed in Sweden, a country which stands out for its extensive use of quasi-markets. 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 schools and eldercare nursing homes, we demonstrate that competition and profit incentives, though crucial, are insufficient catalysts for innovation in quasi-market contexts. Such markets demand a set of supporting institutions of an epistemic nature. 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.
    • 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," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 10.
    2. Fredrik Andersson & Henrik Jordahl & Jens Josephson, 2019. "Outsourcing Public Services: Contractibility, Cost, and Quality," CESifo Economic Studies, CESifo Group, vol. 65(4), pages 349-372.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Entrepreneurship; Innovation; Innovation Policy; Marketized care; Merit goods; Quasi-markets; Welfare services;
    All these keywords.

    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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