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

Ali Raza (Department of Industrial Engineering, Universita Degli Studi di Padova, Padua, Italy)
Moreno Muffatto (Department of Industrial Engineering, Universita Degli Studi di Padova, Padua, Italy)
Saadat Saeed (Durham University Business School, Durham, UK)

Journal of Small Business and Enterprise Development

ISSN: 1462-6004

Article publication date: 23 June 2018

Issue publication date: 28 January 2019

971

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.

Keywords

Citation

Raza, A., Muffatto, M. and 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, Vol. 26 No. 1, pp. 133-157. https://doi.org/10.1108/JSBED-01-2018-0014

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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