The Entrepreneurial State

Abstract

Duvall and Freeman (1983) propose an explicit theory to explain the entrepreneurial role of the state in developing societies. Their argument illuminates linkages between the benefits that an elite group receives from state entrepreneurial activity and the support that this group provides to the state. In this article the authors examine theoretically and empirically the ability of their theory to explain the evolution of state entrepreneurship in a rapidly industrializing society, Taiwan. Overall, the authors show that the formal theory of Duvall and Freeman holds several features not heretofore explicated but that it is remarkably robust in providing a cogent framework in which to interpret recent Taiwanese economic history. In short, the fit between the model of Duvall and Freeman and the empirical data for Taiwan is quite strong. This suggests that state entrepreneurship is used in developing societies in a countercyclical way in order to help manage the political economy. The authors also explore the possible implications that economic stagnation and increasing democratization have for the entrepreneurial activity of the state in Taiwan.