The influence of formal institutions on the relationship between entrepreneurial readiness and entrepreneurial behaviour

Abstract

Purpose The purpose of this paper is to use a unique set of measures from Holmes et al. (2013) to clarify the relationship between entrepreneurial readiness and entrepreneurial behaviours across countries and determine whether formal institutions moderate this relationship. Design/methodology/approach This paper uses data collected by the Global Entrepreneurship Monitor, the Index of Economic Freedom, Political Risk Services, and the Freedom House and Political Constraint Index to test a theoretical model. A multilevel analysis is performed based on set of 377,356 observations from 51 countries spanning eight years (2001-2008). Findings The results suggest that entrepreneurial readiness has a strong relationship with entrepreneurial behaviour (as measured by entrepreneurial entry and opportunity-based entrepreneurship) and that this relationship strengthens with increases in political democracy (PD), government regulations (GR), financial capital availability (FCA) and market liquidity (ML). Research limitations/implications The study is based on Holmes et al.’s (2013) institutions that are most important for society, uses satisfactory sample size and multi-level modelling. However, many more institutional conditions that remain to be considered might affect entrepreneurial activities. Practical implications For policy-makers, the results show that PD, GR, FCA and ML correlate favourably with entrepreneurial behaviour when individuals have a high level of entrepreneurial readiness. Policy-makers should introduce policies that provide a secure environment to individuals to start their own ventures. Originality/value The current study is among the first to examine the three dimensions of formal institutions—political, regulatory, and economic institutions—in a single study. Using the three dimensions, the study explains theoretically and examines empirically the effect of individual-level entrepreneurial readiness on entrepreneurial behaviour.

Impact of country-level corporate governance on entrepreneurial conditions

“…Several studies have also investigated the determinants of entrepreneurship conditions and activities (e.g. Amha & Ageba, 2006;Ngunjiri, 2010;Avnimelech et al, 2011;Fernández-Serrano & Romero, 2014;Jiménez & Alon, 2018;Álvarez & Amorós, 2014;Shagbazian & Aistov, 2017;Sá & de Pinho, 2019;Wennekers et al, 2002;Kim et al, 2015;Haggard & Haggard, 2018;Estrin et al, 2017;Raza et al, 2019;Shinnar et al, 2012;Tsai et al, 2016;Tabares, 2017;Ghosh, 2016;Goltz et al, 2015;Giotopoulos et al, 2017;Peris-Ortiz et al, 2018;Schillo et al, 2016;Aidis et al, 2012;Urbano & Aparicio, 2016). Shagbazian and Aistov (2017) report in the same vein that there is a positive and strong relationship between bribery control and early-stage company survival rate.…”

Improvement of the Quality of Business Environment Model: Case of the SME Segment

“…As mentioned above, the literature on entrepreneurship (Stenholm et al, 2013) and institutions (Baumol 1990;North 1990;Sobel 2008) assumes that social norms along with legislation and regulatory framework, known as institutional environments, create the conditions for individual to make decisions, which is essential in entrepreneurial cognition and the QBE (Sobel 2008;Pinho 2017;Raza et al, 2018;Luskova et al, 2018). As Douhan and Henrekson (2010) claim, institutional framework has the capacity to determines whether an activity is destructive, unproductive or productive.…”

Testing Entrepreneurial Intention Determinants in Post-Transition Economies

“…Henao-García et al [48] showed that the probability of entrepreneurial involvement increases for a person who owns a personal network, that provides social capital, and facilitates the process of creating new activities, but provides an opening to new opportunities, a risk aversion, and especially it contributes to self-efficiency [63]. Ardagna and Lusardi [34] showed that entrepreneurs get help from their social networks whenever they need it, and the size of the network and the strength of the connection among members are essential for collecting the resources needed, and entrepreneurial success largely depends on the size and power of social networks [64].…”