Schumpeterian Law

Joseph Schumpeter, the famed theorist of innovation, advocated for entrepreneurial breakthroughs: private sector innovation based on a new product, a new production mechanism, a new product ecology, or entering a new market. For him, innovative entrepreneurs were revolutionaries, bringing much needed disruption to the market system of established players. Others have made a caricature out of this - equating the innovative entrepreneur with a person, who thrives on breaking the rules and despises existing rules and norms.

We question this simplified version of Schumpeter and suggest that the legal system as a societal framework of rule making and rule enforcement can and does facilitate innovative entrepreneurship, perhaps more so than some entrepreneurs (and certainly some commentators) may think. We suggest that one way of conceptualizing the role of rules and norms vis-a-vis entrepreneurs is through the lens of risk and uncertainty. We caution that most conceptual frameworks of innovative entrepreneurship, however, are flawed not primarily in how they see policy making, but how they conceive of innovation.