Abstract
Entrepreneurship will not always productive: Baumol (1990, 1993) distinguishes between productive, unproductive, and destructive entrepreneurial activities, and in the last two cases, new values are not created. Setting of from the notion of destructive entrepreneurship and the bankruptcy institute as framework for the empirical analysis, we use long aggregate series on bankruptcies and bankruptcy frauds in Sweden, 1830–2010. We operationalize destructive entrepreneurship with bankruptcy frauds. The bankruptcy institute is not a pure cleansing mechanism; assets can be redistributed by criminal procedure. Thus, a form of destructive entrepreneurship can be conducted within this system. We link bankruptcy frauds to the selection mechanism—the aggregate bankruptcy volume—over time. We cannot establish any direct linkages between the bankruptcy volume and institutional changes. However, and in line with research on bankruptcy diffusion and diffusion of economic crimes, we find that bankruptcy frauds have significant, positive impacts on the bankruptcy volume. Therefore, our results indicate that increases in bankruptcy frauds, destructive entrepreneurship, would affect the economic system.
Highlights
Entrepreneurship is commonly associated with innovation and the increase of welfare (Schumpeter 1911, 1939, 1949)
We focus on the relation between bankruptcy frauds and bankruptcies and we make use of several different historical and contemporary sources in order to construct these long series
The autoregressive distributed lag (ARDL) model has been widely used in economic studies, including crime and economic growth (e.g., Narayan and Smyth 2004; Detotto and Pulina 2013), and the regression is based on this model: lnBt 1⁄4 α0 þ ∑pi1⁄41θilnBt−i þ ∑qi1⁄410θGi GDPGGDPt−i þ ∑qi1⁄420θBi F lnBFt−i þ ut ð2Þ
Summary
Entrepreneurship is commonly associated with innovation and the increase of welfare (Schumpeter 1911, 1939, 1949) In his seminal works, Baumol (1990, 1993) distinguishes between three types of entrepreneurship: productive, unproductive, and destructive. In the last two cases, entrepreneurial activity results in redistribution of wealth, and new values are not created; entrepreneurship will have a negative effect on society This fact has been more neglected; the distinction between unproductive and destructive entrepreneurship has been tenuous and often ignored (Desai et al 2013). Baumol shows that the supply and the very type of entrepreneurship are determined by formal and informal institutions In his theory, the supply of entrepreneurial talent varies less than the allocation entrepreneurship: individuals will put their talent to use in activities that are either productive, unproductive, or destructive. These are not a criminal act per se, but may often work against the interest of creditors and the public (Akerlof et al 1993).
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