Do informal institutions affect entrepreneurial intentions?

Abstract

Purpose The purpose of this paper is to empirically define the ways in which informal institutions influence entrepreneurial intentions. It tests the statement that informal institutions can have an impact on people’s decisions, directly and indirectly, by affecting their perceptions of the external world. Design/methodology/approach The paper develops a theoretical model of the probability of starting a business by a potential entrepreneur. The model takes into account a comparison of current wages and future profits. The empirical analysis is based on European social survey data at the individual level. Three-stage least squares regression helps to overcome the endogeneity problem since perceptions of government actions are individual specific. Findings Informal institutions can affect expectations about future activities in a person’s lifetime utility maximisation problem. The paper empirically concludes that these institutions are connected with a person’s satisfaction with government and can indirectly affect the probability to be self-employed. Research limitations/implications Research limitations are related to employing proxies for informal institutions, using only the “satisfaction with government” as a perceptions indicator, and cross-sectional data while defining the causal effect. Practical implications Policymakers should consider that institutional settings affect people in a different manner when developing their policies. Originality/value The paper makes a novel contribution by analysing the effect of informal institutions on the probability to start a business by using both theoretical arguments and empirical tests. Building upon insights from a broader informal institutions’ effect on entrepreneurial intentions, this paper is the first to study a linkage between informal institutions and their indirect effect on people’s profit expectations.

The effect of cultural environment on entrepreneurial decisions

“…This analysis is not the first to analyze the role of culture in determining entrepreneurial activity. Prior research has analyzed the correlation between culture and entrepreneurship in a range of countries, focusing on the interrelationships among religion, education, risk-taking behavior, institutional, geographic and macroeconomic factors, innovation and creativity, openness to change and self-efficacy, the stigma of business failure and individualism values (Ajide and Osinubi, 2020;Altinay, 2008;Escand on-Barbosa et al, 2019;Bayraktar, 2016;Calza et al, 2020;Çelikkol et al, 2019;Chukwuma-Nwuba, 2018;Danish et al, 2019;Estrada-Cruz et al, 2019;Idjaz et al, 2012;Lee et al, 2020;Ostapenko, 2017;Thurik and Dejardin, 2011;Williams and Vorley, 2015). Using a similar approach, Marc en (2014) finds that the entrepreneurial decisions of second-generation immigrants in the United States depend on the entrepreneurial rates in their countries of origin; Butler and Herring (1991) show evidence of the intergenerational transmission of entrepreneurship; and Stevenson (2000) suggests that individuals living in societies that favor entrepreneurship are more likely to become entrepreneurs in the future.…”

Perceptual versus institutional determinants of entrepreneurial entry

“…Informal institutions refer to more implicit, slowly changing, culturally transmitted and socially constructed institutions (Stephan et al, 2015), which reflect collective meanings and understanding that influence cooperation and coordination among individuals in a society. These institutions (embedded in the sociocultural context) influence an individual's choice to pursue entrepreneurial activities (Ostapenko, N., 2017) by rendering that choice socially desirable and legitimate (Scott, 1995). Informal institutions are defining elements of a society's culture, the system of common values and norms that provides a behavioral guide for its members (Granato et al, 1996).…”

Intención emprendedora en los productores de chile del estado de Aguascalientes: Perspectiva desde las relaciones de colaboración

“…Este estudio reflexiona sobre la intención del emprendimiento en el sector agroalimentario en México, como el énfasis que tiene un individuo de formalizar su unidad agrícola reconociéndola como una empresa constituida. Diversos autores han estudiado la intención emprendedora de diferentes maneras (e.g., orientación de carrera) (Aloulou, 2016;Dehghanpour Farashah, 2015;Gorgievski, Stephan, Laguna, & Moriano, 2017), aspiraciones vocacionales (Purwana & Suhud, 2017), emprendedores próximos a crear la empresa (Davidsson & Honig, 2003;Hopp & Sonderegger, 2015;Lasso et al, 2019) y el autoempleo (Ostapenko, 2017;Sánchez, 2011;Vancea & Utzet, 2017). Ligthelm (2008) ha señalado que medir la intención emprendedora en negocios informales permite definir las motivaciones que tiene un emprendedor para crear una empresa con potencial de crecimiento bajo planeación y administración del negocio (Brinckmann, Grichnik, & Kapsa, 2010).…”