The Economics of Entrepreneurship

The Economics of Entrepreneurship

It is hardly possible to give an accurate picture of the modern economic history of a country that is rich today without mentioning those lines of business and companies that have played a central role in the development of the country. There is always a founder and a strong driving force behind the names of the companies – an entrepreneur. When the US overtook Britain and became the technology leader at the previous turn of the century, this was to a large extent due to crucial achievements by such entrepreneurs as John D. Rockefeller, Dale Carnegie and Henry Ford, innovators such as Thomas Edison and Alexander Graham Bell and creative financial capitalists such as J. P. Morgan.

In the same way, Swedish industrialization at the end of the 19th century is associated with specific companies and entrepreneurs such as Lars Magnus Ericsson, Gustaf de Laval, and Alfred Nobel. Behind those new companies that have grown large in the post-war period, there is often an individual who builds a company based on a vision and a strong business idea. Ingvar Kamprad, Erling Persson, and Ruben Rausing might be the most notable of these individuals, but there is also a successful entrepreneur behind most of the companies that have entered the stock exchange lists after the economic crisis at the beginning of the 1990’s.

Despite this, the role of entrepreneurs for economic growth has not been subject to any extensive studies in economic research. At the end of the 1960’s, this absence in traditional analysis was emphasized by William J. Baumol (1968) in his now classical statement that “the theoretical firm is entrepreneurless – the Prince of Denmark has been expunged from the discussion of Hamlet.” Since then, there has been an explosion within entrepreneurial research in business administration, while this research is still in its infancy in economics.

Management research provides valuable information, in particular about the state of affairs within individual companies and lines of business. However, it is less useful in the study of how various institutions and regulations generally affect entrepreneurship and its effect on the renewal of the economy and economic growth. Using analytical methods from economics, which explicitly illustrate the interaction among entrepreneurs, other agents, and institutional conditions and regulations, such effects can be analyzed systematically. For example, we can study how the emergence of a venture capital market affects the general driving forces for establishing new companies. Furthermore, it is possible to obtain more general insights into how different institutional factors affect entrepreneurship by working with data on many entrepreneurial firms and a number of different important background factors for entrepreneurship. Thus, we can generate valuable knowledge about how different institutions and regulations affect economic growth driven by entrepreneurship.

Due to the central role of entrepreneurship for the future of the Swedish economy, the Research Institute of Industrial Economics has created a research program aiming to illustrate basic economic conditions, such as different forms of ownership of corporations, tax systems, and general institutions, that foster entrepreneurially driven growth. A further aim is to make the Research Institute of Industrial Economics the leading research-based source on this important issue in the Swedish public debate.

International cooperation

Visiting researchers

Collaborating with others is essential for IFN as a research institute. Our researchers co-author articles with colleagues from other institutes, and many also teach at various universities and colleges.

As part of our extensive program of guest researchers, leading international researchers visit the institute. The visitors present and pursue their research as well as interact and cooperate with researchers at IFN.

Jordglob 1 för webb


Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 |