Sovereign entrepreneurship
| Published date | 04 December 2018 |
| Date | 04 December 2018 |
| DOI | https://doi.org/10.1108/JEPP-D-18-00042 |
| Pages | 411-427 |
| Author | Alexander Salter |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
Sovereign entrepreneurship
Alexander Salter
Texas Tech University, Lubbock, Texas, USA
Abstract
Purpose –The purpose of this paper is to develop a theory of sovereign entrepreneurship, which is a special
kind of political entrepreneurship.
Design/methodology/approach –This paper uses qualitative methods/historical survey.
Findings –Sovereignty is rooted in self-enforced exchange of political property rights. Sovereign
entrepreneurship is the creative employment of political property rights to advance a plan.
Research limitations/implications –Because a polity’s constitution is determined by its distribution of
political property rights, sovereign entrepreneurship and constitutional change are necessarily linked. The author
illustrated how sovereign entrepreneurship can be applied by using it to explain the rise of modern states.
Practical implications –In addition to studying instances of sovereign entrepreneurship in distant history,
scholars can apply it to recent history. Sovereign entrepreneurship can be especially helpful as a tool for doing
analytic narratives of low-ncases of political-economic development, especially when those polities attract
interests for being “development miracles.”
Originality/value –This paper uses treats sovereignty as a political property right.
Keywords Entrepreneurship, Property rights, Political entrepreneurship, Theory of the firm,
Residual claimancy, Sovereign
Paper type Research paper
1. Introduction
Within the social and managerial sciences, political entrepreneurship has recently become a
prominent topic (e.g. Agarwal et al., 2009; Bernier and Hafsi, 2007; Bjerregaard and Lauring,
2012; Bysted and Jespersen, 2014; Kivleniece and Quelin, 2012; Klein et al., 2010, 2013;
Leyden and Link, 2015; Martin and Thomas, 2013; McCaffrey and Salerno, 2014;
McGinnis and Ostrom, 2012; Ostrom, 2005; Skarbek, 2016). Theoretical studies of political
entrepreneurship develop frameworks for understanding entrepreneurship in non-market
settings. Empirical studies of political entrepreneurship focus on particular cases,
highlighting the mechanisms that govern incentive alignment and information feedback
that political entrepreneurs confront in specific scenarios. Taken together, these studies
increase our understanding of how opportunity discovery and seizure, radical innovation
and the exercise of personal judgment relate to social change within and across
sociopolitical institutions. I contribute to the theoretical literature on political
entrepreneurship by introducing and developing the concept of sovereign
entrepreneurship. As I will argue, sovereign entrepreneurs are political entrepreneurs who
enforce their own prerogatives, rather than delegating enforcement to a third party.
Focusing on this specific sub-category of political entrepreneurship is useful because it
yields a generalizable framework for understanding the relationship between
entrepreneurial behavior and the growth and development of political institutions.
Because political institutions also influence economic outcomes, my theory sheds light on
the relationship between entrepreneurship and economic development as well.
The term “sovereign entrepreneur”is not completely novel. The closest works to mine
that employ similar terminology are Brauer and Haywood (2011) and Salter (2018).
Brauer and Haywood (2011) explore entrepreneurial behavior on the part of non-territorial
sovereigns (organizations other than states). Salter (2018) explicitly uses the term “sovereign
entrepreneur”in describing political entrepreneurship in early modern Prussia, but does not
develop a general theory. The former of these two papers relies mostly on a legal
Journal of Entrepreneurship and
Public Policy
Vol. 7 No. 4, 2018
pp. 411-427
© Emerald PublishingLimited
2045-2101
DOI 10.1108/JEPP-D-18-00042
Received 1 September 2018
Revised 30 September 2018
Accepted 1 October 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
JEL Classification —D23, M10, H83, P16
411
Sovereign
entrepreneurship
understanding of sovereignty, which is by far the most common approach to sovereignty.
The latter uses it as a social scientific concept, informed by but ultimately distinct from legal
concepts. I build on these two studies in different ways. Like Brauer and Haywood (2011)
I provide a link between entrepreneurship and political-economic development. Like Salter
(2018) I use sovereignty as a social scientific category rather than a legal one, focusing on
de facto rather than de jure control of political property rights by sovereign entrepreneurs.
In developing the theory of sovereign entrepreneurship, I draw on and contribute to
several literatures within political economy and managerial-organizational science. The
political economy literature focuses on the economics of property rights (Alchian, 1965;
Barzel, 1997; Coase, 1960; Demsetz, 1967; Libecap, 1989). This includes a more specialized
literature that uses insights from property rights economics to understand hierarchical
organizations, and specifically the business firm (Aghion and Tirole, 1997; Alchian and
Demsetz, 1972; Fama and Jensen, 1983; Hart, 1995; Hart and Moore, 1990; Jensen and
Meckling, 1976; Rajan and Zingales, 1998; Williamson, 1985, 1996). My theory of sovereign
entrepreneurship is related to these works because sovereign entrepreneurship occurs
within a specific institutional context, namely, the political-entrepreneurial state, which can
be thought of as a non-market analogue to the entrepreneurial firm.
The managerial, organizational and administrative sciences literature often draws
insights from economics –rational actors, the importance of contracts, the possibility of
strategic behavior, etc. –but applies it more specifically to problems that, but for the
institution of the firm, would significantly impair economic activity. This literature
explicitly links ownership of assets to the nature of the firm (e.g. Foss and Klein, 2012;
Foss et al., 2017; Furubotn, 1988; Hansmann, 1996, 2012; Hart and Zingales, 2017;
Hoskisson et al., 2018; Klein et al., 2012, 2017) and details how possession of residual cash
flow rights and residual control rights creates governance mechanisms that are robust to
incentive and information imperfections. My theory of sovereign entrepreneurship makes
use of these ideas, particularly the link between ownership of assets and the exercise of
judgment (Foss and Klein, 2012). My theory will look very familiar to scholars working
within these literatures, and will simultaneously shed new light on political
entrepreneurship and the institutions within which it takes place.
Importantly, many of the useful functions that firms perform in the above literatures can
be generalized to other forms of hierarchy. It has long been recognized, for example, that
firms and governments perform many of the same functions: creating and enforcing rules,
allocating resources, adjudicating disputes, etc. This by itself creates possibilities for some
institutional generalizability across commercial and political hierarchies, and hence
commercial and political entrepreneurship. Thus, the features of hierarchical organizations
that give form to the tradeoffs agents face when behaving entrepreneurially must play a
prominent role in a theory of sovereign entrepreneurship as well.
I organize theremainder of this paper as follows.In Section 2, I provide a brief overviewof
sovereignty and explain how I will use the concept in the subsequent analysis. In Section 3,
I develop the theory of sovereign entrepreneur ship, which manifests within the
political-entrepreneurial state. In Section 4, I show that the theory has valuable analytical
content by using it to explain the rise of modern states, focusing on how ownership
and control rightsto government were allocated duringthe era of state-building. In Section 5,
I conclude by exploring directions for future research.
2. Sovereignty
Sovereignty has traditionally been the purview of political philosophy and legal studies.
At its most general, sovereignty refers to supreme authority over some polity, typically a
state with internal geographic contiguity. This conception of sovereignty, which differs
from earlier medieval and Roman theories, dates to the Reformation Wars in Europe.
412
JEPP
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