The spatial interplay between productive and destructive entrepreneurship: do institutions meet expectations in rural areas?

Little is known about the coexistence and possible substitutability of destructive and productive entrepreneurship in regions characterized by weak institutions. This study explores the role of institutions in the interplay between destructive entrepreneurial activity (i.e. new coca crops share) and productive entrepreneurship (i.e. new coffee crops share) in rural Colombia. Institutional economics is used to frame our analysis, which is supported by an empirical spatial Durbin model. Using data from the municipal level of the Coffee National Information System during the 2000–2010 period, we found that destructive entrepreneurship has directly displaced productive entrepreneurship and the other way around. Although it is hypothesized that the presence of coffee-supportive institutions such as extensionists (i.e. regional representation of the national coffee association) mitigates the relationship between these entrepreneurial activities in favour of productive entrepreneurship, our results show that institutions are insufficient to control the crowding-out effect of destructive on productive entrepreneurship. The theoretical and policy implications of the study are considered in light of these findings.