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Antje Fiedler - GARS - German Aviation Research Society

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Institutional and market environment<br />

Institutions<br />

• Institutions are formal and informal rules that influence, enable<br />

or constrain human behaviour (North, 2005)<br />

• Created by human agency<br />

• Incentive structure of society incentives for innovation<br />

Market environment<br />

• According to Baumol (2002): market mechanism is the key to<br />

economic welfare<br />

• Institutions foster free-market pressure (competition)<br />

force firms to innovate

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