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Working Paper No. 1395

Schumpeterian Entrepreneurship: Coveted by Policymakers but Impervious to Top-Down Policymaking

Working Paper
Henrekson, Magnus, Anders Kärnä and Tino Sanandaji (2021). “Schumpeterian Entrepreneurship: Coveted by Policymakers but Impervious to Top-Down Policymaking”. IFN Working Paper No. 1395. Stockholm: Research Institute of Industrial Economics (IFN).

Magnus Henrekson, Anders Kärnä, Tino Sanandaji

Differentiating various types of entrepreneurs provides clues to the puzzle of why top-down policies often fail to create Schumpeterian entrepreneurship and the ecosystems where it thrives. Schumpeterian entrepreneurship is intrinsically contrarian, whereas public policy has a bias toward incremental innovation and replication of past success. If central planners knew what the next radical innovation would be, there would be no need for Schumpeterian entrepreneurs. Schumpeterian entrepreneurs create not only companies but also institutions in the entrepreneurial support system. These ever-evolving structures are too complex to design, and central planning instead reduces the space for organic institutional innovation.