Property rights, entrepreneurship, and economic development

Abstract

The disparity in economic progress across nations still confound economists. However, economists know that institutions play a significant role in economic growth. The entrepreneurial activity within a society is shaped by the institutional foundation, especially the property rights structure. However, if property rights are not well-defined and well-enforced, the substance of this entrepreneurial activity may not be welfare-enhancing or growth-enhancing. What is still unclear is the mechanism by which better property rights are adapted in order to facilitate more productive entrepreneurship. By synthesizing insights from the literatures on the market process, the emergence of property rights, and institutional entrepreneurship, this paper presents a mechanism, specifically the ‘property rights institutional entrepreneur,’ that is alert to opportunities to introduce, redefine, or eliminate property rights in order to better facilitate market exchange. By characterizing this specific form of institutional entrepreneur, our understanding of the layers of property rights’ definition, provision, and enforcement is clearer. Property rights are grounded in the norms and customs of a society, but they receive feedback from the market. This feedback is a necessary component to thinking about how property rights change occurs and facilitates economic growth.