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

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Ph: +46 8 665 4583
niklas.elert@ifn.se

Magnus Henrekson

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

Interdisciplinary European Studies

Trust in the European Union in Challenging Times

2018-Trust-in-the-European-Union-by-Oxelheim.jpg

This is the first book in the Interdisciplinary European Studies collection. This volume provides an interdisciplinary perspective on trust in the EU from the vantage point of political science, law and economics. Lars Oxelheim, Lund University and affiliated to IFN, is one of the authors.

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