A Literature Review on Institutional Change and Entrepreneurship

Abstract

The literature argues that what is an institution, how institution changes, and the relationship between institutional change and entrepreneurship. I argue that institution is not only the rule in a hierarchical order, but also a rule as something spontaneously and endogenously shaped and sustained in the repeated operational plays of the game itself [1]. Culture and meaning are important in the definition of institution. An institution conceptualized is essentially endogenous, but appears to be an exogenous constraint to the individual agents [2]. Paths of in institutional change have two ways: Demand Induced Change—Bottom-up Change or Supply Induced Changes: Change from above and from outside. Entrepreneurship does an important role during institutional change. Most of researches about the relationship of entrepreneurship and institutional change are how nation’s institution or economic policy influence entrepreneurship, and how entrepreneurs’ actives make the economy successful or unsuccessful. I argue that entrepreneurship is not only concerned with business success, as measured by profits, but also with subjective welfare and noneconomic wellbeing. Entrepreneurship is a catalyst for structural change and institutional evolution. Evasive entrepreneurs could be viewed as a new rule-breaker. In most theories of institutions and entrepreneurship, causality is understood to run from institutions to entrepreneurship [3].