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ICC Advance Access published online on April 18, 2005
Industrial and Corporate Change, doi:10.1093/icc/dth060
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© The Author 2005. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved.

Article

Entrepreneurship: a weak link in the welfare state?

Magnus Henrekson *

* To whom correspondence should be addressed.
Magnus Henrekson, E-mail: Magnus.Henrekson{at}hhs.se


  Abstract

Entrepreneurship is largely ignored or treated in a highly simplified way in endogenous growth theory. Still, it is now widely recognized that the supply of entrepreneurial talent is likely to be important for economic growth, innovation and job creation. This study consists of an in-depth examination of how the supply of productive entrepreneurship is likely to be affected by the kind of tax and welfare arrangements that may prevail in a mature welfare state. Sweden, allegedly the most extensive of all welfare states, is the object of the empirical analysis. It is shown how key welfare state institutions tend to reduce economic incentives both for opportunity-based and necessity entrepreneurship. Both aggregate economic performance and data on firm growth and direct measures of entrepreneurial activity are broadly consistent with the identified structure of payoffs. A number of measures can be implemented to strengthen entrepreneurial incentives within extensive welfare states, but the fact still remains that an entrepreneurial culture and a welfare state are very remotely related. As a result, the respective cultures are unlikely to be promoted by a similar set of institutions.


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