Indirectly Productive Entrepreneurship
Journal of Entrepreneurship and Public Policy. Vol. 5. Issue 2, pp: 161-175
27 Pages Posted: 26 Mar 2015 Last revised: 17 Sep 2016
Date Written: March 18, 2016
Since Baumol (1990), the economic literature distinguishes between two broad categories of entrepreneurship: productive and unproductive entrepreneurship. This paper attempts to introduce a third category: indirectly (un)productive entrepreneurship. We argue that profit seeking entrepreneurs will decide to allocate their talents to indirectly (un)productive activities to meet individuals' new needs emerging as a result of government intervention. As a result, the resources used to meet these needs will be diverted from other uses. This paper argues that these profit opportunities are not the result of market entrepreneurial errors or successes but rather emerge artificially as a result of inefficiencies or unintended consequences that some government interventions produce. One implication of this paper is that we should observe increasing regulatory capture by businesses that will benefit from these "artificial" profit opportunities. This paper provides examples of indirectly (un)productive entrepreneurial activities that wouldn't have arise if it weren't for government regulation.
Keywords: entrepreneurship, productive entrepreneurship, unproductive entrepreneuurship, indirect entrepreneurship
JEL Classification: D21, M13
Suggested Citation: Suggested Citation