It was sociologist, Shmuel Noah Eisenstadt who was among the very first few individuals who coined the term ‘institutional entrepreneurship’ to refer people who have made themselves a “means” by which fundamental changes were bought about to certain structures and processes. In essence, these are people who strive to achieve market-oriented institutions. To cite an example in a much larger scale, a change in today’s economic structure is what is now popularly referred to as “globalization.”

Fundamentally, this kind of entrepreneurship deals with making a significant change in the “rules of the game” as triggered by individuals who have the capacity to make it happen, whether formally or informally. Why do these people bring about institutional entrepreneurship? It could be due to any of the following reasons:

• Prestige
• Power
• Profit

Institutional Entrepreneurship Approaches

Oftentimes, these entrepreneurs have to deal with business problems because of the various institutional barriers that are causing it. These so-called “barriers” come in many forms and are usually caused by laws, regulations, and rules mandated by the government. In order to get rid of these, institutional entrepreneurs have come up with four major approaches that aim to push for better opportunities to them.

1. Special case or exceptions approach. This is the safest of all four approaches and works simply by establishing a rationale that such an institutional change is needed because of a special need, giving it good reason to be exempted by the laws and regulations.

2. Private persuasion approach. This is done by meeting with the decision-makers privately. Lobbying for institutional change can be easier for some of these entrepreneurs because their concerns can be laid out more explicitly and effectively since it becomes a private matter that only key players will be made aware of.

3. Grow the business before giving justification approach. Many entrepreneurs use this approach. They start the business first and grow it, evading laws and regulations that are restrictive to the business. Once it is already established and doing well in the market, a report is then made by the entrepreneur, stating the success of his business, and convincing the government to make changes to the current laws and regulations.

4. Open advocacy approach. More often than not, institutional entrepreneurs make use of the open advocacy approach to break institutional barriers. What they do is to speak up through the various forms of media such as in a TV interview, a forum discussion, or a research program to be heard by the government and general public. But for this approach to be effective, the entrepreneur needs to establish the idea that this change will be beneficial to society.

Traditional Entrepreneurs vs. Institutional Entrepreneurs

There are at least three distinct differences between traditional and institutional entrepreneurs.  In terms of outcomes, the traditional entrepreneur’s success can pave the way for business models that future entrepreneurs will follow. On the other hand, an institutional entrepreneur does not only become a role model but he also opens opportunities and better means by which future entrepreneurs can use to grow their business.

Secondly, while a traditional entrepreneur has to face market risks which involves making accurate assessments of market demands and business expenses, an institutional entrepreneur deals with market risks as well as institutional risks. This means that problems may arise should the government refuse to accept his proposal for change.

Lastly, traditional entrepreneurs need to be intelligent when it comes to managing his business whereas for institutional entrepreneurs to have better chances at success, he needs to have a high level of business intelligence as well as political prowess in order for him to know how to effectively deal with government regulations and restrictions.

How to Become an Institutional Entrepreneur

Being an entrepreneur is a bold step. An institutional entrepreneur takes higher risk to promote change in a certain institution and is ready to face the outcome. It is also important for an institutional entrepreneur to have a solid background of politics, and the government laws and regulations so that appropriate actions can be taken, whenever needed.

You need to conduct thorough research on laws and regulations before trying your hand at breaking institutional barriers and when you are working towards something very important, you must be prepared to do it on your own. You will most likely gain friends as well as enemies because of what you are trying to do.