The Political Economy of Entrepreneurship: An Introduction

Research Institute of Industrial Economics Working Paper

IFN Working Paper No. 688

24 Pages Posted: 27 Jun 2007 Last revised: 3 May 2019

See all articles by Robin Douhan

Robin Douhan

Uppsala University - Department of Economics

Magnus Henrekson

Research Institute of Industrial Economics (IFN)

Date Written: January 2, 2007


In this introductory chapter to a collective volume dealing with the political economy of entrepreneurship, we argue, based on a suggested unifying framework, that political economy is a fruitful approach to entrepreneurship. The importance of institutions in structuring such an analysis is also emphasized. The introduction also introduces the selected articles and puts them in context. Vital functions of the capitalist economy are ascribed to the productive entrepreneur, but the selected articles also show that the social value of entrepreneurship must be evaluated as it is realized. Three facets of entrepreneurship are claimed to be of particular importance from a political economy perspective:

(i) Entrepreneurship is dynamic in the sense that it adapts to the politically determined institutional framework within which it acts. Under propitious circumstances, it can be a powerful engine of growth, but it can also be channelled in unproductive and destructive directions.

(ii) Entrepreneurship enters directly into the political system. The close connection to property rights constitutes a link between entrepreneurship and private versus public ownership and redistribution. Under unfavourable institutional circumstances, rent-seeking and predatory entrepreneurship, via the political system, offer greater profit opportunities than the market.

(iii) A political economy approach is necessary in order to understand how the political system shapes the institutional setup. Here, it is emphasized that the distribution of political power is partly determined by economic wealth. Hence, it is relevant to broaden the analysis to the effects on wealth creation and wealth redistribution stemming from entrepreneurial activity.

Keywords: Entrepreneurship, Industrial policy, Innovation, Property rights, Regulation, Self-employment

JEL Classification: H32, L5, L25, M13 , O31, P14

Suggested Citation

Douhan, Robin and Henrekson, Magnus, The Political Economy of Entrepreneurship: An Introduction (January 2, 2007). Research Institute of Industrial Economics Working Paper, IFN Working Paper No. 688, Available at SSRN: or

Robin Douhan

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala

Magnus Henrekson (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
Grevgatan 34
Stockholm, SE-10215
+46-8-6654502 (Phone)
+46-8-6654599 (Fax)


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