Entrepreneurship and Development: Cause or Consequence?

Types of Entrepreneurship and Economic Growth

“…Entrepreneurs experiment with new combinations of which the outcomes are uncertain, but in order to make progress, many new variations have to be tried in order to find out which ones will improve (economic) life (Rosenberg and Birdzell 1986). Other authors have argued that entrepreneurship will only unlock economic development if a proper institutional setting is in place (Baumol 1990;Powell 2008;Boettke and Coyne 2003). This institutional setting comprises informal as well as formal institutions (North 1990).…”

Evasive Entrepreneurship and Institutional Change

“…The institutions governing the protection of property rights are regarded as fundamental to the promotion of entrepreneurial activities conducive to knowledge and growth (Baumol 1990;Johnson et al 2000;Boettke and Coyne 2003;Spencer and Gomez 2004;Acemoglu et al 2005a;Powell 2008). However, Ostrom (1990) has documented the great diversity of institutional forms that a variety of groups have discovered and developed in their efforts to govern people with not state involvement.…”

“…In most theories of institutions and entrepreneurship, causality is understood to run from institutions to entrepreneurship, and some scholars thus conclude that institutions are the main determinant of entrepreneurship (see, e.g., Boettke and Coyne 2003). This conclusion clashes with the Schumpeterian view of the entrepreneur as a rule-breaker (Schumpeter 1934(Schumpeter , 1942Zhang and Arvey 2009).…”

Micro-foundations for Innovation Policy

“…Economists generally share the opinion that it is not the role of government to change the attitude of its people, perhaps even leading to "social engineering" (Storey 2002), or that public policy cannot change the culture of a country in order to stimulate the supply of entrepreneurship, on the short term (Baumol 1990). Some economists have argued that entrepreneurship is an omnipresent aspect of human action, and that for economic development to take place, certain institutions must be present in order for the entrepreneurial aspect of human action to flourish (Boettke and Coyne 2003). This omnipresence also means entrepreneurship cannot be the "cause" of economic development: it is caused by proper institutions that channel entrepreneurship in a direction that spurs economic growth (cf.…”