Working Paper No. 1128

The Entrepreneurial Rent: The Value of and Compensation for Entrepreneurship

Published: June 16, 2016, revised December 2016 and March 2017Pages: 22Keywords: Entrepreneurship; Economic rent; Entrepreneurial rent; Innovation; ImitationJEL-codes: D51; J30; L26; O31
Published version

The Entrepreneurial Rent: The Value of and Compensation for Entrepreneurship Magnus Henrekson and Mikael Stenkula


The surplus that is created in a successful entrepreneurial venture is much higher than the profit corresponding to the risk-adjusted market rate of return. The part of the surplus that exceeds this level may be denoted “entrepreneurial rent.” Such rents normally disappear in the long run but so-called isolating mechanisms ensure that these rents persist in the short or medium run.

Entrepreneurial rents arise when successful entrepreneurship is exercised and entrepreneurial firms create and successfully commercialize something new and unique. The presence of and search for entrepreneurial rents is a prerequisite for the innovations and structural change required to generate economic growth. High ex post compensation for successful entrepreneurship cannot be taxed harshly without affecting entrepreneurs’ willingness to supply effort.

 

 

 

Magnus Henrekson

Contact

Ph: +46 (0)8 665 4502
magnus.henrekson@ifn.se

Mikael Stenkula

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Ph: +46 8 665 4530
Mob: +46 73 844 18 78
mikael.stenkula@ifn.se

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

Omslag 2017 Institutional Reform for Innovation and Entrepreneurship.jpg

The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

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