Drawing on baumols concepts of productive, unproductive and destructive entrepreneurship and relevant amendments, this thesis aims to contribute to the entrepreneurship literature by developing a conceptual framework which allows operationalising the concepts for empirical assessment. The reward outcomes depend totally on the countrys institutional structure. Productive and unproductive entrepreneurship in latvia 7 productive entrepreneurship refers, simply, to any activity that contributes directly or indirectly to net output of the economy or to the capacity to produce additional output baumol. The example of latvian small enterprises january 2007 in book. Is america encouraging the wrong kind of entrepreneurship. The purpose of this paper is to examine the correlation between the degree of economic freedom in state institutions and industry employment and then determine how these.
This basic fact frames the rest of baumols lucid article. Building on the work of baumol on productive versus unproductive entrepreneurship, i consider criminal activity as a form of unproductive entrepreneurship. Nevertheless, unproductive and destructive entrepreneurship persist in contemporary economies, often taking the form of rentseeking and bureaucracybuilding. Baumol also argues that the relative balance of productive, unproductive, and destructive entrepreneurs is not dictated by technology or culture. As baumol observes, there are unproductive entrepreneurial activities, and at times the entrepreneur may even lead a parasitical existence that is actually damaging to the economy. Theoretical exploration of productive, unproductive and destructive entrepreneurship 2. Baumol 1990, 1993 distinguishes between productive, unproductive, and destructive entrepreneurial activities, and in the last two cases, new values are not created. Jun 01, 2017 over twentyfive years after its original publication, baumols 1996 trichotomy of productive, unproductive, and destructive entrepreneurship is seminal to the entrepreneurship literature. Productive, unproductive, and destructive, journal of political economy, university of chicago press, vol. Apr 18, 2018 entrepreneurship will not always productive. Where most parasitic and predation models focus on the struggle for the golden eggs, in our model the goose actually gets killed.
However, when the costs of illegal economic activities or rentseeking behaviour are much lower than possible profit, entrepreneurs may engage in destructive or unproductive entrepreneurship aidis et al. Military strategy and unproductive entrepreneurship in. The basic hypothesis is that, while the total supply of entrepreneurs varies among societies, the productive contribution of the societys entrepreneurial activities. We link this analysis to the employment relation and ownership structure. Setting of from the notion of destructive entrepreneurship and the bankruptcy institute as framework for the empirical analysis, we use long aggregate series on bankruptcies and. Baumol 1990 provides an elaborate explanation on various entrepreneurial activity, they are categorised as productive, unproductive and destructive entrepreneurship. Thus, government policy is important for entrepreneurship. Inspired by the work of william baumol in 1990 and later 1996, this paper unravel the nature of entrepreneurship prevailing in zimbabwe and concludes that more of unproductive and destructive entrepreneurship. Productive, unproductive, and destructive, late economist william baumol argued that not all entrepreneurs are equal. According to the entrepreneurship literature the nature and extent of entrepreneurial value creation affects not only the sustainability and success of the venture, but also influences its wider contribution to the development of the economy. Entrepreneurship can be unproductive or destructive lpe.
However, entrepreneurial talent can be allocated among productive, unproductive, and destructive activities. The current research on entrepreneurship as an economic phenomenon often assumes its desirability as a driver of economic development and growth. Productive, unproductive, and destructive university of illinois at urbanachampaigns academy for entrepreneurial leadership historical research reference in entrepreneurship posted. Creative, unproductive and destructive by william j. Industry formation and state economic growth stephan f. Productive, unproductive, and destructive william j. Pdf productive, unproductive and destructive entrepreneurship in. Although effort has been made to make this distinction, still there is no consensus in the literature as to what determines productive, unproductive and destructive entrepreneurship. Hence, society is better off when entrepreneurs navigate poor institutions relative to reduced entrepreneurial activity.
But what policies are more conducive to productive entrepreneurship. Entrepreneurship productive, unproductive and destructive. Identifying social entrepreneurship as creating both social and economic value, we discuss productive, unproductive, and destructive entrepreneurship in terms of. Do interactions between formal and informal institutions. Productive, unproductive and destructive begins with a quote from the marxist historian eric bosbawm. Productive, unproductive, and destructive relative to what. The allocation of ownership rights and the character. The basic hypothesis is that, while the total supply of entrepreneurs varies among societies, the productive contribution of the societys entrepreneurial activities varies much more because of their allocation between productive activities, such as innovation, and largely unproductive activities, such as rent seeking or organized crime. Productive and destructive entrepreneurship in a political. As noted earlier, for example, murphy, shleifer, and vishny 1991, 520 state that talent will allocate to either activity. Productive and unproductive entrepreneurship in latvia 7 productive entrepreneurship refers, simply, to any activity that contributes directly or indirectly to net output of the economy or to the capacity to produce additional output baumol, 1993. Drawing on baumols concepts of productive, unproductive and destructive entrepreneurship and relevant amendments, this book develops a conceptual framework which allows operationalising the.
Mafia activity in these hobbesian situations might actually make the environment at least somewhat more predictable for the productive entrepreneur. Unproductive activities today include tax evasion and rent seeking such as. Government policy, in turn, shapes the institutional environment in which entrepreneurial decisions are made. As a result, the contributions made by entrepreneurs can vary based on the activities on which these entrepreneurs choose to focus. However, entrepreneurial talent can be allocated among productive, unproductive and destructive activities. Given a countrys institutional structure, entrepreneurs can take market opportunities to. Sep 01, 2008 entrepreneurship is an important engine of growth. This study looks at the effect of institutional quality on new business activity and organized crime. State control, entrepreneurship and resource allocation. My findings show that proentrepreneurial sociocultural values drive both productive and unproductive. Productive, unproductive and destructive entrepreneurship core. This process is theorized as driven by institutions.
Baumol 1990 william baumol, who strikes me as one of the leading contenders for a nobel in the near future, has written a surprising amount of interesting economic history. Productive, unproductive and destructive entrepreneurship a theoretical and empirical exploration series. Feb 26, 2014 entrepreneurship productive, unproductive and destructive 1. Public policy, productive and unproductive entrepreneurship. Inspired by the work of william baumol in 1990 and later 1996, this paper unravel the nature of entrepreneurship prevailing in zimbabwe and concludes that more of unproductive and destructive entrepreneurship is taking place. However, douhan and henrekson 2010 show that this oversight is not. Furthermore, using data from longitudinal survey, author makes one of the first attempts to address. These contributions can be productive, unproductive, and even destructive. Zimbabwe regarding entrepreneurship and the systemic factors that stimulate its development.
Yet perhaps the greatest tribute current scholars can pay baumol is to carefully criticize and expand upon his arguments. This paper is limited to exploring productive and unproductive entrepreneurship, nevertheless baumol also dis tinguishes destructive entrepreneurship. Entrepreneurship can be unproductive or destructive lpe project. As a critical contribution to the literature on social entrepreneurship, this paper provides structure and clarity to this concept, situating it within the context of charity and philanthropy as sources of social value creation. A theory of destructive entrepreneurship, jena economic research. This allocation is heavily influenced by the relative.
Nevertheless, unproductive and destructive entrepreneurship persist in contemporary economies, often taking the form of rentseeking and bureaucracy building. Rather, entrepreneurship can be both productive and unproductive and even destructive depending on the institutional framework in which it takes place. Pdf this chapter offers a retrospective account of william baumols entrepreneurship. Productive, unproductive and destructive entrepreneurship. If incentives promote productive entrepreneurship, entrepreneurs will adapt their activities to these opportunities.
These examples show that the classification into productive, unproductive and destructive entrepreneurship is by no means straightforward, as baumol himself recognizes in later writings baumol 1993. Productive, unproductive and destructive entrepreneurship in an advanced transition setting. Pdf drawing on baumols concepts of productive, unproductive and destructive entrepreneurship and relevant amendments, this book develops a conceptual. The role of government policy on entrepreneurial activity. While entrepreneurship creates social value at the economy level in the appropriate. Destructive entrepreneurship in the small business sector. Examples of unproductive and destructive entrepreneurship include rent seeking in the form of litigation. Baumol new york university and princeton university the basic hypothesis is that, while the total supply of entrepreneurs varies among societies, the productive contribution of the societys entrepreneurial activities varies much more because of their alloca. Although the tradeoff between productive and unproductive entrepreneurship has been. As sobel 2008 elaborates, productive entrepreneurship is more likely to expand in a market. Productive, unproductive, and destructive provides a foundation for a wide range of research ventures in entrepreneurship theory, history, and policy. A theory of destructive entrepreneurship, jena economic research papers 2007085, friedrichschilleruniversity jena. Flow of presentation introduction compensation and success theory social capital concept data, variables, and methods. Pdf entrepreneurship, public policy and poverty reduction.
Entrepreneurship, profit, and the rules of the game baumol explains that entrepreneurship. Baumol new york university and princeton university the basic hypothesis is that, while the total supply of entrepreneurs varies among societies, the productive contribution of the societys entrepreneurial activities. N2 this paper serves as an introduction to the special issue of entrepreneurship theory and practice on government policy and entrepreneurial activity. Together, these three assumptions shift the lens from productive and unproductive entrepreneurship to destructive entrepreneurship. From productive to destructive entrepreneurship, and back. For example, innovation can be perceived as a productive contribution from entrepre. Economic organization and the tradeoffs between productive. The empirical analysis utilizes unbalanced international panel data of up to 75 countries between 2002 and 2012. The basic hypothesis is that, while the total supply of entrepreneurs varies among societies, the productive contribution of the societys entrepreneurial activities varies much more because of their allocation between productive activities such as innovation and largely unproductive activities such as rent seeking or organized crime. The social value of productive entrepreneurship springerlink. The research on entrepreneurship as an economic phenomenon often assumes its desirability as a driver of economic development and growth. According to baumol 1990, unproductive and destructive entrepreneurship are the actions that have a negative, even destructive consequence on the output of the economy. Yet perhaps the greatest tribute current scholars can pay baumol.
Furthermore, using data from longitudinal survey, author makes one of the first attempts to address the. Mar 08, 2019 the basic hypothesis is that, while the total supply of entrepreneurs varies among societies, the productive contribution of the societys entrepreneurial activities varies much more because of their allocation between productive activities such as innovation and largely unproductive activities such as rent seeking or organized crime. It is often assumed that an economy of private enterprise has an automatic bias toward innovation, but this is not so. Where the institutional rules of the game north, 1990 can themselves be exploited for profit, entrepreneurs find themselves in a zerosum game competing for the privileged position. Productive entrepreneurship is that which contributes to societal wellbeing, including the introduction of new products or new production processes. Baumol, princeton and new york universities entrepreneurship is perhaps a bit like the weather commentators frequently complain about it or, rather, about its absence but no one seems to know anything that can be done about it. Productive, unproductive, and destructive in light of its.
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