ABSTRACT
This chapter offers a general application to institutional issues. It comments on Economic Value Added (EVA) and macroeconomic performance. A well-functioning healthy economy will reveal higher and more stable levels of EVA. Firms capture profits in a macroeconomic environment that is more or less stable. Perhaps most important, institutions define the limits within which entrepreneurial creativity and alertness operates. The reason why countries with extractive institutions do not have successful entrepreneurs is not the lack of entrepreneurial creativity, it is because of the strict limits imposed by the institutions of these countries. Broadly speaking, a firm can achieve high levels of EVA in three ways. First, by securing a high rate of revenue earned on capital invested. Second, by having low production costs. Third, by having a low discount rate (opportunity cost of invested capital). Finally, the chapter maps different dimensions of economic freedom into an EVA analysis.
