Institutionalized Disruption: The Rise of the Reformer Startup

Abstract

The following essay emerges from a joint symposium of the Hastings Business Law Journal and the Hastings Science and Technology Law Journal entitled “Regulating the Disruption Economy: Tech Startups as Regulatory Reformers.” The symposium was held on March 20, 2015, and featured panels on virtual currency, crowdfunding, and the sharing economy.

Drawing from the symposium, this essay considers why startups are increasingly taking up the mantle of regulatory reform, how they are achieving their successes, and whether the reformer startup is a positive development for our political economy. It tentatively proposes that: (1) features of the current venture-capital market and startup ecosystem, rather than the pace of technological advancement, might explain the timing, (2) a “bootleggers and Baptists” dynamic of well-resourced interest groups and popular messaging explains the successes, and (3) we should be cautiously optimistic about this “institutionalized disruption” of incumbents.

Keywords: Entrepreneruship, venture capital, sharing economy, crowdfunding, virtual currency, political choice theory

JEL Classification: L51,P16