Business Magazine

Why Institutions Are Essential to Entrepreneurship

Posted on the 01 March 2013 by Center For International Private Enterprise @CIPEglobal
Fast-growing economies have institutions that allow entrepreneurs to take risks. (Photo: Businessweek)

Fast-growing economies have institutions that allow entrepreneurs to take risks. (Photo: Businessweek)

Why is it that some economies adapt to change and produce long-run growth, while others stall? We observe that in the adaptive economies, entrepreneurs drive change and innovation. So why then do talented entrepreneurs play a leading role in a few societies and yet hit the wall in others? What causes entrepreneurs to make the leap from dealing in guilds and bazaars to participating in global markets?

Mary Shirley, President of the Ronald Coase Institute, digs deeply to explain how fundamental institutions make all the difference. In “Why Institutions Are Essential to Entrepreneurship,” new from CIPE’s Economic Reform Feature Service, Dr. Shirley offers clear insights into the mechanisms that facilitate exchange and reduce the risks of being an entrepreneur. Societies that lack these institutions — the limited access societies — fail to unleash the entrepreneurial drive. However, those that nourish creative business endeavors improve their long-run economic performance.

This article is part of a forthcoming CIPE report on Creating the Environment for Entrepreneurial Success.

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