The influence of formal institutions on the relationship between entrepreneurial readiness and entrepreneurial behaviour: A cross-country analysis

Raza, A.; Muffatto, M.; Saeed, S.

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.

Citation

Raza, A., Muffatto, M., & Saeed, S. (2019). The influence of formal institutions on the relationship between entrepreneurial readiness and entrepreneurial behaviour: A cross-country analysis. Journal of Small Business and Enterprise Development, 26(1), 133-157. https://doi.org/10.1108/jsbed-01-2018-0014

• Journal Article Type: Article
• Acceptance Date: May 14, 2018
• Online Publication Date: Feb 11, 2019
• Publication Date: Feb 11, 2019
• Deposit Date: May 23, 2018
• Publicly Available Date: May 23, 2018
• Journal: Journal of Small Business and Enterprise Development
• Print ISSN: 1462-6004
• Publisher: Emerald
• Peer Reviewed: Peer Reviewed
• Volume: 26
• Issue: 1
• Pages: 133-157
• DOI: https://doi.org/10.1108/jsbed-01-2018-0014
• Keywords: Entrepreneurial entry, Opportunity-based entrepreneurship, Entrepreneurial readiness, Formal institutions, Multilevel.
• Public URL: https://durham-repository.worktribe.com/output/1325880