Unlocking entrepreneurial potential: unveiling the role of both types of institutional forces

Elham Garmroudesfandiari (), Vajihe Baghersad () and Morteza Akbari ()
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Elham Garmroudesfandiari: University of Tehran
Vajihe Baghersad: National University of Skills (NUS)
Morteza Akbari: University of Tehran

Journal of Global Entrepreneurship Research, 2025, vol. 15, issue 1, 1-20

Abstract: Abstract The institutional framework of a nation is critical for fostering entrepreneurship and driving economic growth. While most research has traditionally focused on the impact of formal institutions, this study explores the effects of both formal and informal institutions on entrepreneurial development, highlighting their coexistence and interaction in shaping entrepreneurial behavior and outcomes. Specifically, this study analyzed the ease of business launching, access to credit, entrepreneurial alertness, and fear of failure. Two models were developed to investigate the factors influencing the presence and absence of entrepreneurial activity. Using fsQCA, data from the Global Entrepreneurship Monitor and the World Bank, covering 54 countries, were analyzed. The findings indicate that the impact of institutional factors on entrepreneurship levels varies based on each country’s socioeconomic characteristics. They suggest that diverse institutional arrangements contribute to the presence of entrepreneurship. Although entrepreneurship can thrive in challenging institutional environments, future research should focus on formalizing these conditions into standardized institutional frameworks. This shift aims to transition from necessity-driven to opportunity-driven entrepreneurship, which is crucial for fostering innovation and promoting economic development.

Keywords: Institutional theory; Entrepreneurship; Formal institutions; Informal institutions (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s40497-025-00430-x

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