When Institutions Matter: How Income and Education Shape Entrepreneurship in Emerging Economies

What is it about?

This study explores how institutional resource availability and cultural values jointly influence early-stage entrepreneurial activity across countries. Focusing on proximate institutions—informal investment and entrepreneurship education—it examines how these resources support national venture creation. Drawing on institutional theory, the study differentiates between proximate institutions that directly supply entrepreneurial resources and background institutions, like cultural values, that shape how such resources are applied. Using data from 42 countries, this study finds that nations with greater resource munificence—more financial (informal investments) and human (entrepreneurship education) resources—show higher early-stage entrepreneurship. However, this effect weakens in cultures with strong hierarchical or conservative values. Hierarchical societies restrict resource sharing to preserve privilege, while conservative cultures emphasize loyalty to close groups and avoid outsiders, limiting the flow of resources vital for new venture creation. These findings show that entrepreneurship depends not only on institutional resources but also on cultural conditions that determine whether those resources are freely accessible. Policymakers seeking to promote entrepreneurship should therefore focus not only on enhancing financial and educational infrastructure but also on fostering cultural egalitarianism and openness. Encouraging cross-group collaboration and reducing cultural rigidity can help ensure that institutional resources effectively support entrepreneurial growth.

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Photo by MIGUEL BAIXAULI on Unsplash

Photo by MIGUEL BAIXAULI on Unsplash

Why is it important?

This research is unique in integrating institutional theory with cultural value dimensions to explain how resource munificence translates into entrepreneurial activity across nations. By identifying hierarchy and conservatism as key cultural moderators, the study demonstrates that institutional resources alone are insufficient to drive entrepreneurship if social norms inhibit their free flow. This perspective advances cross-national entrepreneurship research by linking the accessibility of institutional resources to the deeper cultural context in which they operate. The study is particularly timely as many countries strive to stimulate entrepreneurship as a driver of innovation and economic renewal. Conducted across a diverse set of nations, it highlights that developing economies must consider both structural and cultural reforms to build thriving entrepreneurial ecosystems. By aligning institutional resource development with cultural change toward openness and equality, governments can foster environments where resources flow more freely and entrepreneurial activity can truly flourish.