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William J. Baumol: Innovative Contributor to Entrepreneurship Economics

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William J. Baumol was one of the most prolific economists of his generation, analyzing a broad range of central economic issues addressing real problems of the world. In this essay, we present and critically evaluate Baumol’s research contributions in entrepreneurship economics and point to areas for future research. Baumol contributed an impressive number of important insights, increasing our understanding of entrepreneurship from both a macro and a micro perspective. He also devoted a large part of his writings to discussing public policy, linking his theoretical insights with policy issues in practice. His analyses are rooted in contemporary mainstream neoclassical economics, and one of his main objectives was to integrate the entrepreneur into this tradition. Today, Baumol is best known for his tripartite distinction between productive, unproductive, and destructive entrepreneurship and his associated idea that the institutional framework, “the rules of the game,” will determine how entrepreneurs allocate their time and effort across different—productive or unproductive—activities. An institutional environment that encourages productive entrepreneurship and spontaneous experimentation while disincentivizing unproductive activities becomes, through this insightful lens, the driving force of economic growth. As an economist, Baumol was knowledgeable and well acquainted with earlier scholars and their writings about entrepreneurship. Baumol’s writings were greatly inspired by Joseph Schumpeter’s views on entrepreneurship, and he made several attempts to formalize Schumpeter’s concept of the innovative entrepreneur. Baumol was in all senses an innovative contributor to entrepreneurship economics. His work has inspired the research community of entrepreneurship scholars, but like all great scientists, he also encountered criticism.

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  • Henrekson, Magnus & Stenkula, Mikael, 2021. "William J. Baumol: Innovative Contributor to Entrepreneurship Economics," Working Paper Series 1403, Research Institute of Industrial Economics, revised 21 Apr 2022.
    • Handle: RePEc:hhs:iuiwop:1403
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    More about this item

    Keywords

    Entrepreneurship; Innovation; Institutions; Rent seeking;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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