The impact of the institutional environment on entrepreneurial activity: an analysis of developing and developed countries

Abstract

PurposeEntrepreneurship can be understood as a systemic phenomenon, thus relying on sets of influential factors associated with socioeconomic contexts. Institutional conditions play a pivotal role in this regard, affecting the allocation of entrepreneurial efforts. The goal of this research is to verify to what extent do the pillars of Countries' Institutional Profiles – regulatory, cognitive and normative – affect both the prevalence and quality of entrepreneurship, assessing the differences between developing and developed countries both in total entrepreneurial activity and in the following qualitative frames: innovation rate, high job creation expectations and motivational index.Design/methodology/approachThe authors’ assessment uses data from the Global Entrepreneurship Monitor (GEM) with a longitudinal approach for 112 countries over the period 2003–2019. Dynamic panel data regressions are applied.FindingsBy comparing developing and developed countries, findings highlight that institutional effects are heterogeneous among developing and developed countries, with informal institutions being more relevant for developing countries than formal ones. Also, using a broad range of institutional indicators, the authors’ assessment indicated that the association between institutional conditions and productive entrepreneurship seems to be far more intricate than argued by theoretical literature.Practical implicationsThe authors’ findings indicate the need for developing countries to address formal institutional voids in order to generate more effective conditions for productive entrepreneurship to emerge. Following prior literature, this can have systemic impacts on trajectories for economic growth and development.Originality/valueThe originality of this research consists in using a longitudinal and integrative approach to compare institutional effects on different types of entrepreneurship, as well as comparing these effects in countries at different stages of development.

Institutional and individual determinants of entrepreneurial intentions: evidence from developing and transition economies

“…Specifically, these results contribute to the findings of previous research that accept the relationship between normative institutions and entrepreneurial intentions (Valdez and Richardson 2013;Schlaegel et al 2013;Oftedal et al 2018;Khalilov and Yi 2021). The results confirm that the entrepreneurial intentions of individuals embedded in social settings who affirm entrepreneurship as a desirable phenomenon in both countries show an improved trend on average (de Mello et al 2022). Our results on the cognitive-cultural dimensions show that these institutions do not directly affect entrepreneurial intentions (H3).…”

“…In this vein, while economic reforms encourage individuals to engage in economic development, the impact of the institutional environment on entrepreneurial growth becomes crucial, as do the barriers from institutional settings to entrepreneurial entry (Galindo Martin et al 2019 ). Hence, longitudinal studies are required to analyze institutional reforms and the dynamic co-evolution of institutional environment and entrepreneurship in transition and developing economies (Li et al 2021; Sethuram et al 2021 ; de Mello et al 2022 ). Fourth , while our research provides important information on the impact of institutions on entrepreneurship, it does not provide information on the interaction between these institutions and their effect on EI.…”

“…Despite the burgeoning literature, in recent years, scholars have called for investigation of the impact of institutions on individual entrepreneurial intentions and orientations (Kraus et al 2019 ; Bagis et al 2022 ) in developing economies (Sethuram et al 2021 ; de Mello et al 2022 ). Previous research examining the effects of institutions on entrepreneurial intentions is mainly based on Global Entrepreneurship Monitor (GEM) data and multi-country analyses.…”

Institutional support and self-efficacy as catalysts for new venture performance: a study of iGen entrepreneurs

“…The institution's ability to meet various needs is a foundation for iGen entrepreneurs who need more business assistance and guidance in developed and developing countries (D'Andrea, 2022; Mello et al. , 2022).…”

The role of business environment optimization on entrepreneurship enhancement

“…How to cultivate higher entrepreneurship has been the focus of domestic and foreign scholars' research, which mainly focuses on the following aspects: first, according to the "institutional critical hypothesis", the external institutional environment affects entrepreneurship. Studies have demonstrated that the institutional environment (Lucas et al, 2022;Chowdhury et al, 2019), property rights protection system (Bu and Liao, 2022), legal environment (Yang et al, 2022), the degree of local corruption (Liu and Li, 2022), and government control (Akhmetshin and Shafigullina, 2015) directly or indirectly have an impact on entrepreneurship. Second, according to the theory of information asymmetry, studies have been conducted from financing constraints (Jensen et al, 2022), the level of financial development (Jiang and Fan, 2021), which consider finance as an important factor affecting the level of entrepreneurial innovation and entrepreneurial input.…”