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Capital is not enough: opportunity entrepreneurship and formal institutions

Christopher J. Boudreaux () and Boris Nikolaev ()
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Christopher J. Boudreaux: Florida Atlantic University
Boris Nikolaev: Baylor University

Small Business Economics, 2019, vol. 53, issue 3, 709-738

Abstract: Abstract We examine how economic institutions, measured by the Economic Freedom of the World (EFW) index, affect the relationship between capital—human, social, and financial—and opportunity-motivated entrepreneurship (OME). To do this, we develop a multi-level model that connects theories of human and social capital at the micro-level to institutional theories at the macro-level. Using data from the Global Entrepreneurship Monitor (GEM), we then test the predictions of our model and find evidence that economic institutions play a crucial role in the relationship between these three distinct types of capital and OME. Our results are somewhat counter-intuitive—as the quality of the institutional environment improves, human and financial capitals become less important determinants of entrepreneurship while the relationship between social capital and entrepreneurship substantially strengthens.

Keywords: Economic freedom; Entrepreneurship; Financial capital; Human capital; Institutions; Social capital (search for similar items in EconPapers)
JEL-codes: E22 J24 L14 L26 M13 (search for similar items in EconPapers)
Date: 2019
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