Regulatory Co-Creation and Institutional Uncertainty: Entrepreneurial Agency in Emerging Industries

This study examines how entrepreneurs in Canada’s recreational cannabis industry actively shape regulatory frameworks within a context of institutional uncertainty. Drawing on institutional theory, we argue that regulations in emerging, heavily regulated sectors are not fixed constraints but dynamic constructs subject to negotiation. Through semi-structured interviews with cannabis executives across multiple provinces, we find that unclear and evolving policies can foster bottom-up innovations. Entrepreneurs leverage gaps, inconsistencies, and ambiguities in the regulatory system to adapt or circumvent restrictive rules, often justifying rule-bending as a response to illogical or unfair frameworks. Their actions both expose regulatory shortcomings and prompt incremental adaptations, underscoring an ongoing dialogic process between entrepreneurs and regulators. Using the Gioia Methodology, we develop a data structure revealing three key themes: navigating regulatory ambiguity, exerting agency in co-creating policy, and challenging existing constraints. Our findings reposition entrepreneurs from passive adopters of regulation to active institutional entrepreneurs who transform emerging industries by co-creating their governing frameworks.