Theoretical and Applied Economics (May 2024)
Empowering entrepreneurship: the crucial nexus of institutional arrangements and sustainable development
Abstract
This paper presents a holistic examination of the interaction between the institutional framework and entrepreneurship to achieve the objective of sustainable development. This paper aims to explore the relationship between institutional arrangements, entrepreneurship, and sustainable development, with a particular focus on the member states of the European Union. The research is conducted in response to the global imperative for sustainable development, analyzing the inclusiveextractive institutional dichotomy as a starting point in understanding the complexity of the interaction between entrepreneurship and the promotion of sustainable development. The analysis is based on established theories of institutional economics, essential to capture the manner in which inclusive and extractive institutional arrangements shape the incentives or constraints within which entrepreneurial initiatives unfold. Entrepreneurship plays a crucial role in stimulating sustainable development by encouraging innovation, and the institutional framework is decisive for entrepreneurial behavior. Institutional arrangements that encourage business development, through stability, predictability, and promotion of competition, support sustainable development. The study aims to highlight the negative consequences of an institutional framework affected by corruption and bureaucratic obstacles, which hinder innovation and limit the potential for sustainable development. Furthermore, the study emphasizes the nuanced dimensions of sustainable entrepreneurship, highlighting the emergence of socially and environmentally responsible business models, as well as the institutional framework that favors them. In conclusion, this paper addresses the relationship between institutional arrangements and entrepreneurship in achieving sustainable development, and it aims at contributing to the progress of theory and practice in the field of entrepreneurship and sustainability, thus facilitating the transition to more efficient and prosperous societies.
