Managing destructive entrepreneurship in place: formal and informal institutions for the achievement of regional economic growth

Abstract

Given institutional incentives, is entrepreneurship always good for the economy? While the literature about its benefits for society is extensive, a salient lacuna exists regarding the negative side of entrepreneurship. This study, hence, explores how institutions condition destructive entrepreneurial activity, which is linked to the economic growth of Colombian regions. Institutional economics helps us understand the underlying relationships, which are tested through 3SLS, on a sample of 1122 municipalities in Colombia. We show that a negative effect of new coca crops (as destructive entrepreneurship) on regional economic growth exists, but it is conditioned by the institutional reinforcement and integral performance index (as formal institutions), as well as historical land conflict and hectares of land belonging to religious sects (as informal institutions). Other forms of (destructive) entrepreneurship are therefore envisioned and put in place for the continued development of the current literature and the management of public policy.