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Indirectly productive entrepreneurship

Author

Listed:
  • Alexandre Padilla
  • Nicolás Cachanosky
Abstract
Purpose - – Since Baumol (1990), the economic literature has distinguished between two broad categories of entrepreneurship: productive and unproductive. The purpose of this paper is to introduce another subcategory: indirectly productive entrepreneurship. Sometimes, profit-seeking entrepreneurs allocate their talents to indirectly productive activities to mitigate the new costs market participants endure as a result of a government regulation. The resources used to mitigate these costs must be diverted from other uses. Design/methodology/approach - – This paper uses the example of cell phone storage outside New York City’s high schools to illustrate an indirectly productive entrepreneurial activity that mitigates the inefficiencies or costs created by a regulation. These costs and the resulting entrepreneurship would not have arisen absent the regulation. Findings - – These profit opportunities do not result from market entrepreneurial errors or successes but emerge from inefficiencies or unintended consequences produced by government regulations. When evaluating such entrepreneurship, the question is whether such regulation is desirable from an efficiency viewpoint because such entrepreneurship, while making such regulation less inefficient or less costly, diverts resources from other lines of production. Originality/value - – This paper identifies a new category of entrepreneurship: indirectly productive entrepreneurship. This paper also shows that government regulation often deters productive entrepreneurship. However, under some circumstances, regulation can indirectly encourage productive entrepreneurship by creating artificial profit opportunities that would not have existed otherwise.

Suggested Citation

  • Alexandre Padilla & Nicolás Cachanosky, 2016. "Indirectly productive entrepreneurship," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 5(2), pages 161-175, August.
    • Handle: RePEc:eme:jepppp:v:5:y:2016:i:2:p:161-175
    DOI: 10.1108/JEPP-03-2015-0016
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    References listed on IDEAS

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    10. Tilman Brück & Wim Naudé & Philip Verwimp, 2013. "Entrepreneurship and Violent Conflict in Developing Countries," WIDER Working Paper Series wp-2013-028, World Institute for Development Economic Research (UNU-WIDER).
    11. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
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    Cited by:

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    2. Mohammad Ali Al Qudah, 2018. "The Impact of Entrepreneurship Initiatives in Enhancing Creativity and Innovation," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(7), pages 157-157, June.
    3. Lucas, David S. & Fuller, Caleb S., 2017. "Entrepreneurship: Productive, unproductive, and destructive—Relative to what?," Journal of Business Venturing Insights, Elsevier, vol. 7(C), pages 45-49.

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