Institutional environment and public policy greatly affect incentives determining the direction of entrepreneurial activity and innovation that are the engines of economic growth. In societies with poor institutions, entrepreneurial talent is mostly directed towards seeking rents rather than generating productive innovations. But even in modern capitalist economies entrepreneurial activity and innovation are strongly influenced by public policies, for example, those related to intellectual property rights. This course seeks to provide students with analytical frameworks that will enable them to understand how various formal and informal institutional arrangements and public policy decisions influence entrepreneurial activity and innovation and how this, in its turn, affects economic efficiency and growth potential of nations.