We argue that evasive entrepreneurship is an important, although underrated, source of innovation, and provide the first systematic discussion of the concept. We define evasive entrepreneurship as profit-driven business activity in the market aimed at circumventing the existing institutional framework by using innovations to exploit contradictions in that framework. We formulate four propositions of evasive entrepreneurship and illustrate them with a number of real-life examples, ranging from a secret agreement among Chinese farmers in the 1970s to activities of rides-for-hire start-ups in the modern sharing economy. We demonstrate that while evasive entrepreneurship can either be productive, unproductive, or destructive, it may prevent economic development from being stifled by existing institutions during times of rapid economic change. Furthermore, it can spur institutional change with important welfare effects.
KeywordsEntrepreneurship Evasion Innovation Institutions Regulation Self-employment
JEL ClassificationsL5 M13 O31 P14
We are grateful for useful comments and suggestions from Niclas Berggren, Wolf von Laer, Tomasz Mickiewicz, Erik Stam, and Karl Wennberg. Financial support from the Jan Wallander and Tom Hedelius Research Foundation is gratefully acknowledged.
- Acemoglu, D., Johnson, S., & Robinson, J. A. (2005). Institutions as the fundamental cause of long-run growth. In P. Aghion & S. Durlauf (Eds.), Handbook of economic growth (pp. 385–472). Amsterdam: North-Holland.Google Scholar
- Acemoglu, D., & Robinson, J. A. (2012). Why nations fail: The origins of power, prosperity, and poverty. New York, NY: Crown Publishing.Google Scholar
- Aidis, R., Estrin, S., & Mickiewicz, T. (2009). Entrepreneurial entry: Which institutions matter? CEPR discussion paper no. 7278. Centre for Economic Policy Research, London.Google Scholar
- Airbnb. (2015). Terms of service. Airbnb. https://www.airbnb.com/terms. Accessed August 31, 2015.
- Alesina, A., & Drazen, A. (1991). Why are stabilizations delayed? American Economic Review, 81(5), 1170–1188.Google Scholar
- Ardagna, S., & Lusardi, A. (2010). Explaining international differences in entrepreneurship: The role of individual characteristics and regulatory constraints. In J. Lerner & A. Schoar (Eds.), International differences in entrepreneurship (pp. 17–62). Chicago, IL: University of Chicago Press.CrossRefGoogle Scholar
- Baumol, W. J. (2010). The microtheory of innovative entrepreneurship. Princeton, NJ: Princeton University Press.Google Scholar
- BBC. (2014). Uber service ‘Banned’ in Germany by Frankfurt Court. BBC News. http://www.bbc.com/news/technology-29027803. Accessed August 31, 2015.
- Bjuggren, C. M. (2015). The effect of employment protection rules on labor productivity. IFN working paper no. 1061. Research Institute of Industrial Economics, Stockholm.Google Scholar
- Bosma, N., & Levie, J. (2010). Global entrepreneurship monitor 2009 executive report. Babson College, Universidad del Desarrollo, Reykjavík University and London Business School.Google Scholar
- Caballero, R. J., & Hammour, M. L. (2000). Creative destruction and development: Institutions, crises and restructuring. NBER working paper no. 7849. National Bureau of Economic Research, Cambridge, MA.Google Scholar
- Coase, R. H. (1988). The firm, the market, and the law. Chicago, IL: University of Chicago Press.Google Scholar
- Coase, R. H., & Wang, N. (2012). How China became capitalist. New York, NY: Palgrave Macmillan.Google Scholar
- Coyne, C. J., & Leeson, P. T. (2004). The plight of underdeveloped countries. Cato Journal, 24(3), 235–249.Google Scholar
- CPUC. (2013). Decision adopting rules and regulations to protect public safety while allowing new entrants to the transportation industry. California Public Utilities Commission. http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M076/K998/76998666.PDF. Accessed August 31, 2015.
- de Soto, H. (1989). The other path: The invisible revolution in the third world. New York, NY: Harper Collins.Google Scholar
- de Soto, H. (2000). The mystery of capital: Why capitalism triumphs in the West and fails everywhere else. New York, NY: Basic Books.Google Scholar
- DiMaggio, P. J., & Powell, W. W. (1991). Introduction. In W. W. Powell & P. J. Dimaggio (Eds.), The new institutionalism in organizational analysis (pp. 1–38). Chicago, IL: University of Chicago Press.Google Scholar
- Djankov, S., Ganser, T., McLiesh, C., Ramalho, R., & Shleifer, A. (2008). The effect of corporate taxes on investment and entrepreneurship. NBER working paper no. 13765. National Bureau of Economic Research, Cambridge, MA.Google Scholar
- Edwards, R. C. (1979). Contested terrain: The transformation of the workplace in the twentieth century. New York, NY: Basic Books.Google Scholar
- Eldon, E. (2012). DC city council “Uber amendment” would force sedans to charge 5x minimum taxi prices (kill UberX). TechChrunch. http://techcrunch.com/2012/07/09/dc-city-councils-uber-amendment-would-force-sedans-to-charge-5x-taxi-prices-and-kill-uberx/. Accessed August 31, 2015.
- Elert, N., Henrekson, M., & Lundblad, J. (2016). Two sides to the evasion: The Pirate Bay and the interdependencies of evasive entrepreneurship. Journal of Entrepreneurship and Public Policy (forthcoming).Google Scholar
- EU Commission. (2004). European tax survey. Taxation papers working paper no. 3/2004. Office for Official Publications of the European Communities, Luxembourg.Google Scholar
- Fernandez, R., & Rodrik, D. (1991). Resistance to reform: Status quo bias in the presence of individual-specific uncertainty. American Economic Review, 81(5), 1146–1155.Google Scholar
- Gnyawali, D. R., & Fogel, D. S. (1994). Environments for entrepreneurship development: Key dimensions and research implications. Entrepreneurship Theory and Practice, 18(4), 43–62.Google Scholar
- Guardian. (2013). Airbnb’s legal troubles: The tip of the iceberg for the sharing economy? Guardian. http://www.theguardian.com/sustainable-business/airbnb-legal-trouble-sharing-economy. Accessed August 31, 2015.
- Henrekson, M. (2014). How labor market institutions affect job creation and productivity growth. IZA World of Labor, 2014(38), 1–10.Google Scholar
- Jaffe, E. (2012). Micro-subletting is thriving in New York—But is it legal? The Atlantic. http://www.theatlanticcities.com/housing/2012/08/micro-subletting-thrivingnew-york-it-legal/2897/. Accessed August 31, 2015.
- Jörnmark, J. (2013). Teknik slår politik. Riga, EE: Tangent Förlag.Google Scholar
- Kasper, W., Streit, M. E., & Boettke, P. J. (2012). Institutional economics: Property, competition, policies. Cheltenham: Edward Elgar.Google Scholar
- Kirzner, I. M. (1973). Competition and entrepreneurship. Chicago, IL: University of Chicago Press.Google Scholar
- Kirzner, I. M. (1982). Uncertainty, discovery and human action: A study of the entrepreneurial profile in the Misesian system. In I. M. Kirzner (Ed.), Method, process and Austrian economics (pp. 139–159). Lexington, MA: D. C. Heath.Google Scholar
- Kirzner, I. M. (1985). Uncertainty, discovery and human action. In I. M. Kirzner (Ed.), Discovery and the capitalist process (pp. 40–67). Chicago, IL: University of Chicago Press.Google Scholar
- Korsgaard, S., Berglund, H., Thrane, C., & Blenker, P. (2016). A tale of two Kirzners: Time, uncertainty, and the ‘nature’ of opportunities. Entrepreneurship Theory and Practice (forthcoming).Google Scholar
- La Porta, R., & Shleifer, A. (2008). The unofficial economy and economic development. NBER working paper no. 14520. National Bureau of Economic Research, Cambridge, MA.Google Scholar
- Leff, N. H. (1976). Capital markets in the less developed countries: The group principal. In R. McKinnon (Ed.), Money and finance in economic growth and development (pp. 97–122). New York, NY: Dekker.Google Scholar
- Levy, A., & Goldman, H. (2012). Airbnb: To tax or not tax a rented bed. Bloomberg Business. http://www.businessweek.com/articles/2012-09-27/airbnb-to-tax-or-not-tax-a-rented-bed#r¼lr-fs. Accessed August 31, 2015.
- Lieber, R. (2012). A warning for hosts of Airbnb travelers. New York Times. http://www.nytimes.com/2012/12/01/your-money/a-warning-for-airbnb-hostswho-may-be-breaking-the-law.html. Accessed August 31, 2015.
- Lin, J. Y. (1992). Rural reforms and agricultural growth in China. American Economic Review, 82(1), 34–51.Google Scholar
- Lu, C. (1994). Entrepreneurship in suppressed markets: Private-sector experience in China. New York, NY: Garland.Google Scholar
- Ostrom, E. (2005). Understanding institutional diversity. Princeton, NJ: Princeton University Press.Google Scholar
- Pissarides, C. (2001). Employment protection. Labour Economics, 8(2), 131–159.Google Scholar
- Santa Clara High Tech Law Journal (2013). 30th anniversary symposium. http://law.scu.edu/high-tech-law-institute/register-for-30th-anniversary-symposium/. Accessed August 31, 2015.
- Scheiber, N. (2014). Uber and Airbnb are waging a libertarian war on regulators—Silicon Valley’s politics get complicated. New Republic. http://www.newrepublic.com/article/117837/airbnb-uber-wage-war-regulators-army-customers. Accessed August 31, 2015.
- Schumpeter, J. A. (1934). The theory of economic development. Cambridge, MA: Harvard University Press.Google Scholar
- Schumpeter, J. A. (1942). Capitalism, socialism and democracy. New York, NY: Harper and Brothers.Google Scholar
- Seo, M. G., & Creed, W. E. D. (2002). Institutional contradictions, praxis, and institutional change: A dialectical perspective. Academy of Management Review, 27(2), 222–247.Google Scholar
- Shah, P. J., & Sane, R. (2008). India: The elephant in the age of liberation. In B. W. Powell (Ed.), Making poor countries rich: Entrepreneurship and the process of economic development. Oakland, CA: Independent Institute.Google Scholar
- Smith, A. (2004 ). An inquiry into the causes of the wealth of nations. Overland Park, KS: Digireads.com Publishing.Google Scholar
- Streeck, W., & Thelen, K. (2005). Beyond continuity: Institutional change in advanced political economies. Oxford, UK: Oxford University Press.Google Scholar
- The Economist. (2013). The rise of the sharing economy. http://www.economist.com/news/leaders/21573104-internet-everything-hire-rise-sharing-economy. Accessed August 31, 2015.
- Warren, D. E. (2003). Constructive and destructive deviance in organizations. Academy of Management Review, 28(4), 622–632.Google Scholar
- World Bank. (2014). World development indicators. http://data.worldbank.org/data-catalog/world-development-indicators. Accessed August 31, 2015.