Productive and Destructive Entrepreneurship in a Political Economy Framework
23 Pages Posted: 27 Aug 2008 Last revised: 3 May 2019
Date Written: August 13, 2008
Abstract
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.
Keywords: Entrepreneurship, Innovation, Institutions, Regulation, Self-employment
JEL Classification: L5, M13, O31, P14
Suggested Citation: Suggested Citation
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