Institutional factors, opportunity entrepreneurship and economic growth: Panel data evidence

Abstract

Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. Abstract: This paper explores the institutional factors that encourage opportunity entrepreneurship in order to achieve higher rates of economic growth. We suggest that institutions may not have an automatic effect, as is typically assumed in models of endogenous growth. Rather, a mechanism is required to serve as a conduit into the society for those institutional factors that affect productive behavior such as entrepreneurial activity. Thus, opportunity entrepreneurship is identified as one such mechanism that impacts on economic growth. Using a three-stage least-square method through unbalanced panel data with 43 countries (2004-2012), we find that informal institutions have a higher impact on opportunity entrepreneurship than formal institutions. Variables such as control of corruption, confidence in one's skills and private coverage to obtain credit promote a positive effect of opportunity entrepreneurship on economic growth in all the countries of our sample, and especially in Latin American countries as a homogeneous group. These results suggest additional elements to the theoretical discussion in terms of the importance of institutions such framework to understand determinants and effects of opportunity entrepreneurship. Regarding 2 policy implications, the results also suggest that it could be possible to obtain economic growth encouraging the appropriate institutions in order to increase the entrepreneurship by opportunity.

Technological change, rent and income inequalities: A Schumpeterian approach

“…According to Schumpeter, in fact, the introduction of technological innovations is an intrinsic characteristic of the working of economic systems and cannot be separated from economic growth: technological change and economic growth are intertwined. This interdependence has been further clarified by recent advances of the economics of innovation that have brought attention to the contribution of Schumpeter (1934) on the role of entrepreneurship in the introduction of radical innovations (Acs et al, 2013;Aparicio et al, 2016aAparicio et al, , 2016b, rather in contrast to the Schumpeterian focus (Schumpeter, 1942) on the innovative potential of large corporations. The importance of entrepreneurship consists in the fact that the positive rate of technological change is more powerful in reducing income inequality when it is the product of newcomers rather than incumbents (Bruton et al, 2013).…”

“…Fast rates of technological change are associated with the creation of new firms by new entrepreneurs that are able to challenge the incumbents by means of the introduction of radical innovations. Innovations are in turn associated with upward mobility (Aghion et al, 2015b;Aparicio et al, 2016aAparicio et al, , 2016bSanchisLlopis et al, 2015). C) The entry of innovators engenders an increase in market rivalry and a reduction in barriers to entry.…”

Social progress orientation and innovative entrepreneurship: an international analysis

“…The academic literature has been paying increasing attention to the phenomenon of firm creation in the last decade, and, more specifically, innovative entrepreneurship (Acs and Szerb 2007;Aparicio et al 2016a;Carree et al 2007;Freytag and Thurik 2010;Fritsch 2011). This specific recognition is due to the fact that the phenomenon of innovative entrepreneurship has a positive impact on the generation of economic development and social progress at the country level Acs et al 2008b;Amorós and Bosma 2014;Aparicio et al 2016b;Carlsson et al 2013;Reynolds et al 2005;van Stel et al 2005;Wennekers and Thurik 1999;Wennekers et al 2005) and at a regional level Bosma 2009;Dejardin 2011;Feldman 2014;Fritsch 2011).…”

“…Given that the factors that determine innovative entrepreneurial activity are analyzed by academia from different approaches (Bruton et al 2010;Freytag and Thurik 2007;Verheul et al 2002), institutional economics can be a useful approach to understanding the environment created by institutional arrangements and their effect on innovative entrepreneurship at a national level (Aparicio et al 2016a;Urbano and Alvarez 2014). Moreover, at a subnational level, the importance of the regional environment for entrepreneurial intentions and activities has been recognized, since there may be cultural differences promoting variation in entrepreneurship and innovation (Bosma 2009;Feldman 2014;Fritsch 2011;3 Glaeser et al 2010;Saxenian 1994;Stuetzer et al 2014).…”

“…In this regard, innovative entrepreneurship has been deemed the total entrepreneurial activity that includes market innovation, consistent with Schumpeter's (1911) definition of an innovative entrepreneur. Total entrepreneurial activity (TEA) driven by opportunity is another approach for innovative entrepreneurial activity (Aparicio et al 2016a;Reynolds et al 2005). According to these authors, entrepreneurs who are motivated by opportunity perceptions tend to experiment with innovative processes to carry out their new businesses, which is another of Schumpeter's (1911) definitions.…”