Working Paper No. 1144

Status Quo Institutions and the Benefits of Institutional Deviations

Published: December 8, 2016, revised March 2017Pages: 61Keywords: Regulation; Norms; Innovation; Entrepreneurship JEL-codes: L50; M13; O31
Published version

Status Quo Institutions and the Benefits of Institutional Deviations Niklas Elert and Magnus Henrekson

We nuance the widely held view that well-functioning institutions are the ultimate prerequisite for innovation and entrepreneurship. This is done by putting the spotlight on the role that formal and informal institutions have in serving the economic status quo, conserving old habits and incumbent economic interests. Therefore, existing institutions often act as impediments to entrepreneurship and innovation.

We argue that a common yet underappreciated source of institutional change arises when individuals deviate from the behavior stipulated by existing institutions. All types of deviations are certainly not beneficial, but when they take the form of innovations introduced by entrepreneurs, they can be a powerful source of economic and institutional change. An institutional setup should strike a balance between the need for stability that protects people’s expectations and flexibility and adaptability to innovations and the ensuing entrepreneurship.



Niklas Elert


Ph: +46 8 665 4583

Magnus Henrekson


Ph: +46 (0)8 665 4502

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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