As a result, the contributions made by entrepreneurs can vary based on the activities on which these entrepreneurs choose to focus. William baumol, entrepreneurship, unproductive entrepreneurship, destructive. Productive entrepreneurship is that which contributes to societal wellbeing, including the introduction of new products or new production processes. Hence, society is better off when entrepreneurs navigate poor institutions relative to reduced entrepreneurial activity. Pdf this chapter offers a retrospective account of william baumols entrepreneurship. For example, innovation can be perceived as a productive contribution from entrepre. Government policy, in turn, shapes the institutional environment in which entrepreneurial decisions are made. Productive, unproductive, and destructive is intended to provide an enhanced understanding and extension of the nonmathematical theory of entrepreneurship in general 1990, p. 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. This paper serves as an introduction to the special issue of entrepreneurship theory and practice on government policy and entrepreneurial activity.
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. However, entrepreneurial talent can be allocated among productive, unproductive, and destructive activities. This is the first systematic effort to reveal the classical articles in entrepreneurship research and their impact on subsequent scholarship. It is often assumed that an economy of private enterprise has an automatic bias toward innovation, but this is not so. Productive, unproductive, and destructive matthew mccaffrey lecturer in enterprise, university of manchester.
This allocation is heavily influenced by the relative. Drawing on baumols concepts of productive, unproductive and destructive entrepreneurship and relevant amendments, this book develops a conceptual framework which allows operationalising the concepts for empirical assessment. The role of government policy on entrepreneurial activity. Forthcoming in foundational papers in 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 varies much more because of their alloca. These contributions can be productive, unproductive, and even destructive.
Theoretical exploration of productive, unproductive and destructive entrepreneurship 2. The current research on entrepreneurship as an economic phenomenon often assumes its desirability as a driver of economic development and growth. 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. This process is theorized as driven by institutions. Productive and destructive entrepreneurship in a political. Is america encouraging the wrong kind of entrepreneurship. William baumol, entrepreneurship, unproductive entrepreneurship, destructive entrepreneurship, institutions, innovation, economic growth. Unproductive activities today include tax evasion and rent seeking such as. Determinants of productive, unproductive and destructive entrepreneurship. Baumol 1990, 1993 distinguishes between productive, unproductive, and destructive entrepreneurial activities, and in the last two cases, new values are not created. Rather, entrepreneurship can be both productive and unproductive and even destructive depending on the institutional framework in which it takes place. In corrupt regimes, rentseeking and cronyism crowd out valuecreating entrepreneurship. Journal of entrepreneurship and public policy emerald.
A model of destructive entrepreneurship sage journals. However, entrepre neurial talent can be allocated among productive, unproductive and destructive activities. 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. Productive, unproductive, and destructive in light of. So far, only a minority of all works could be analyzed. Productive, unproductive and destructive, journal of political economy, 100 2. Citeseerx document details isaac councill, lee giles, pradeep teregowda. However, when entrepreneurship makes entrepreneurs better and leaves the society in a worse state, it is described as unproductive and destructive entrepreneurship.
Productive, unproductive, and destructive william j. This basic fact frames the rest of baumols lucid article. From productive to destructive entrepreneurship, and back. Productive, unproductive, and destructive 25 years on. Rise of the rentseeker unproductive entrepreneurship is increasingly. These are citations from works listed in repec that could be analyzed mechanically. In the third section, we briefly discuss incentives and the problems of endogenous institutions in directing entrepreneurship. A malmo drug dealer story by aerakis, iason and hmouz, mahmoud. Although the tradeoff between productive and unproductive entrepreneurship has been. In a seminal article in the journal of political economy, titled entrepreneurship.
Corruption also has effects at the micro level because some industries are better situated to. 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 entrepreneurship. We demonstrate that while evasive entrepreneurship can either be productive, unproductive, or destructive, it may prevent economic development from being stifled by existing institutions during. The basic hypothesis is that, while the total supply of entrepreneurs varies among societies, the productive contribution of the societys entrepreneurial activities. Recent research has highlighted the role of institutions in channeling entrepreneurs into activities with positive or negative effects on overall productivity. The basic hypothesis is that, while the total supply of entrepreneurs varies anlong 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. What is crucial is to determine how much productive entrepreneurship we have in countries at different stages of.
Journal of entrepreneurship and public policy available volumes and issues. Productive and destructive entrepreneurship in a political economy framework robin douhan1,2 and magnus henrekson1 october 17, 2008 abstract. Unproductive entrepreneurship is increasingly common in. Productive, unproductive, and destructive in light of its influence on entrepreneurship studies. Productive, unproductive, and destructive, journal of political economy, university of chicago press, vol. On the other hand, as william baumol 1990 famously identified, the outcome of entrepreneurship is not necessarily productive and a boon to the economy. Productive, unproductive, and destructive relative to what. Productive, unproductive and destructive begins with a quote from the marxist historian eric bosbawm. Keywords unproductive entrepreneurship, destructive entrepreneurship, productive entrepreneurship, entrepreneurs, drug dealing. Productive, unproductive, and destructive, baumol argued that the level of entrepreneurial ambition in a country is essentially fixed over time, and that. Productive, unproductive and destructive, william baumol proposed a theory of. Destructive entrepreneurship in the small business sector. This chapter offers a retrospective account of william baumols entrepreneurship. Entrepreneurship, profit, and the rules of the game baumol explains that entrepreneurship.
The book is beneficial to entrepreneurship students as well as entrepreneurship researchers and scholars. 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. 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. The first section describes baumols core arguments about the influence of institutions on the allocation of entrepreneurial talent. In the next section, we present our assumptions and derive our model of destructive entrepreneurship. This chapter offers a retrospective account of baumols contribution in light of its influence on economics and entrepreneurship studies. Drawing on baumols concepts of productive, unproductive and destructive entrepreneurship and relevant amendments, this book develops a conceptual framework which allows operationalising the. This process is described as productive entrepreneurship. The first section describes the core arguments of his original paper. Journal of business venturing vol 11, issue 1, pages 1.
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