Institutional reforms and entrepreneurial growth ambitions

Abstract

Institutional reforms have resulted in deep transformations of the global economy. Yet, the theoretical development and accumulating insights about the effects of institutional reforms on entrepreneurial outcomes have been inconclusive. Our study applies categorisation theory to argue that flexibility- and stability-enhancing reforms may affect entrepreneurial growth ambitions in distinct ways, depending on whether more innovative versus less innovative entrepreneurs perceive specific reforms as an opportunity or a threat. Our study employs a multi-source, repeated cross-sectional dataset of approximately 150,000 entrepreneurs from 65 countries, covering the period from 2002 to 2016. Our findings indicate that flexibility-enhancing reforms lead to higher growth ambitions. They are particularly favoured by less innovative entrepreneurs. On the contrary, stability-enhancing reforms do not affect growth ambitions of entrepreneurs in general but rather increase growth ambitions of more innovative entrepreneurs. Our study provides important theoretical and practical implications about the consequences of institutional reforms on growth ambitions of entrepreneurs with different levels of innovation.