GAČR: Entrepreneurship and Institutional Change: The Case of the Austro-Hungarian Empire Collapse and the Creation of Czechoslovakia

This research project investigated how the allocation of talent between productive and unproductive activities in the Czech lands changed during the transition from the Austro-Hungarian Empire to independent Czechoslovakia. In particular, the project examined how the struggle for national autonomy affected economic activity, how formal and informal institutions shaped incentives for productive and unproductive entrepreneurship, and how the composition of economic elites changed during this period.

The project had resulted in four published journal articles and one book chapter, one article under minor revision, one article accepted for publication, and one additional manuscript. The publications appeared in outlets including Small Business Economics, Public Choice, The European Journal of the History of Economic Thought, and a volume published by Cambridge University Press.

Three publications illustrate the main contributions of the project.

The first, “State-Seeking Nationalism: The Emergence of Small Nations in Multiethnic Empires” (accepted in the Journal of Institutional Economics), develops an explanation of the bottom-up process through which nations can emerge within multiethnic empires. Using the emergence of the Czech nation in the Habsburg Monarchy as its main historical case, the paper shifts attention from the predominantly top-down perspective on nation-building toward the incentives and actions of groups seeking political autonomy. It thereby contributes to our understanding of the relationship between nationalism, institutions, and political organization.

The second, “‘Each to One’s Own’: On the Rise of the Czech School of National Economy at the Turn of the 20th Century” (published in The European Journal of the History of Economic Thought), examines how Czech economists responded to the unusual challenge of promoting the economic development of a nation that did not have its own state. Their concerns included limited access to credit, insufficient entrepreneurship, and an underdeveloped institutional infrastructure. The study sheds light on a relatively neglected episode in the history of economic thought and shows how economic ideas responded to the institutional problems associated with national emancipation.

The third, “The Allocation of Entrepreneurial Talent: Revisiting the Role of Formal and Informal Institutions” (published in Small Business Economics), develops a price-theoretic framework connecting formal and informal institutions with the allocation of entrepreneurial talent. The paper shows why identical formal institutions can produce different entrepreneurial outcomes depending on prevailing informal institutions, such as attitudes toward entrepreneurship or corruption. The framework highlights the importance of alignment between formal and informal institutions and provides a simple analytical and visual tool that can also be used in entrepreneurship education and policymaking.

Taken together, the project contributes to the institutional analysis of nationalism, entrepreneurship, and economic development. It shows how the allocation and use of talent depend not only on economic opportunities but also on the broader formal and informal institutional environment in which individuals make their choices.