Varieties of entrepreneurship: exploring the institutional foundations of different entrepreneurship types through ‘Varieties-of-Capitalism’ arguments

Abstract

While entrepreneurship researchers agree that institutions 'matter' for entrepreneurship, they also have a rather encompassing understanding of institutions as almost any external factor that influences entrepreneurship. Ultimately, this literature thus comes up with a long list of institutional factors that may explain entrepreneurial differences between countries. But which institutions are most influential? How do these institutions relate to different types of entrepreneurship? And to what extent are institutions complementary to each other in the way they sustain different entrepreneurship types? The literature on 'Varieties-of-Capitalism' (VoC) offers a parsimonious theoretical framework to address these questions. Based on the VoC literature, we theoretically derive a consistent set of institutional indicators that can explain differences in entrepreneurship types between countries. Based on principal component and cluster analyses, we illustrate how 21 Western developed economies cluster around four distinct institutional settings. Furthermore, we use simple OLS regressions to show how these institutional constellations are related to different types of entrepreneurship. We conclude that four different 'Varieties of Entrepreneurship' can be identified across the Western world. The main implication of our findings is that a 'perfect' institutional constellation, equally facilitating different types of entrepreneurship, does not exist. Policy-makers seeking to stimulate entrepreneurship are thus faced with the trade-off of targeting policy reforms to that entrepreneurship type they intend to promote-at the expense of other types of entrepreneurship and the broader societal consequences such reforms will have.

Tough on criminal wealth? Exploring the link between organized crime’s asset confiscation and regional entrepreneurship

“…This area of research emphasized that variance in regional founding rates might stem from heterogeneity in the quality of institutions, where prospective entrepreneurs operate (Davidsson and Henrekson 2002;Acs and Szerb 2009;Caliendo and Künn 2014;Dilli et al 2017;Nifo et al 2017;Turok et al 2017). We extend these studies by focusing on the link between policies against organized crime and regional entrepreneurship, which has thus far been neglected.…”

“…We use the term local institutional responsiveness to label the capacity of institutions to handle the asset confiscation process and the uncertainty triggered by confiscation. Local institutional responsiveness relates to existing constructs in the literature on institutions and entrepreneurship, such as the rule of law, regulatory quality, or corruption control (Dilli et al 2017;Nifo et al 2017). However, it differs in two important respects.…”

“…For example, research shows that regional entry rates increase when policies foster knowledge transfer, human capital development, and entrepreneurial orientation (Davidsson and Henrekson 2002;Acs and Szerb 2007;Caliendo and Künn 2014). Dilli et al (2017) theoretically and empirically derive four different institutional constellations that can explain differences in entrepreneurship types between regions. While this stream of research contributed to our understanding of how institutions channel society's financial resources, knowledge, and talent to productive entrepreneurship, we still have a limited understanding of policies aimed at reducing the allocation of resources to unproductive or destructive forms entrepreneurship, such as the control of organized crime.…”

How institutions and gender differences in education shape entrepreneurial activity: a cross-national perspective

“…In the third stage, we examine entrepreneurs' growth aspirations (Estrin and Mickiewicz 2011). As such, our strategy in defining entrepreneurship is similar to Dilli et al (2018). An important motivation to study the role of education in different stages of entrepreneurial activity is Van Der Zwan et al's (2011) argument that cross-country gender differences are largest during the conversion of start-up considerations into start-up activities and in business survival rates.…”

“…While studying the role of institutions in entrepreneurial activity, it is important to consider the complementarity between them (Dilli et al 2018). Research on the varieties of capitalism (VoC) approach shows large differences between national economies (e.g., in terms of their innovativeness and sectoral specialization) due to their institutional arrangements related to the supply of knowledge, interfirm relations, finance, and labor, which support each other (Hall and Soskice 2001).…”