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Incentivizing innovative entrepreneurship in quasi-markets: theory and evidence from Sweden’s schools and nursing homes
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DOI：10.1007/s11187-026-01243-2.png)
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Abstract
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This article discusses welfare quasi-markets, a promising yet under-explored area of study in entrepreneurship research. Many countries have implemented quasi-markets to enhance entrepreneurship and innovation in welfare service provision. However, the benefits have often been limited, as Sweden’s experience illustrates. Based on the Swedish experience, we contend that quasi-markets can unlock their innovation potential only under a suitable institutional framework. By analyzing the development of quasi-markets in primary and secondary education and elderly care nursing homes, we demonstrate that competition and profit incentives, though crucial, are insufficient catalysts for sustained innovation in quasi-market contexts. Such markets require epistemically supportive institutions. These institutions should enable users to make knowledgeable choices and motivate entrepreneurial providers to compete and innovate in ways that align with user preferences. Market-like welfare systems do not automatically generate sustained welfare-enhancing innovation. Drawing on Sweden’s unusually extensive experience with school and nursing-home quasi-markets, we show that competition and profit incentives are necessary but insufficient conditions for innovation: users and providers also need institutions that generate reliable information, make quality differences visible, and allow successful providers to expand while poor performers exit without harming users. The principal policy implication is that welfare quasi-markets should be designed less as procurement or voucher mechanisms alone and more as knowledge-generating systems that help entrepreneurial providers discover and deliver services users actually value.
Keywords:
Entrepreneurship
Innovation
Quasi-markets
Welfare services
Schools
Nursing homes
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