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Institutional quality, conforming and evasive entrepreneurship

Julien Hanoteau () and Virginie Vial
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Virginie Vial: IAO - Institut d'Asie Orientale - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this article, we unpack Baumol's (J Polit Econ 98(5):893–921, 1990) theory of entrepreneurship's outcomes (productive, unproductive, and destructive) in a framework of failing institutions, considering that entrepreneurship is instead first characterized by two non-mutually exclusive types of behavior (conforming versus evasive). We hypothesize that the evasive activity (firm-level corruption) is undertaken as a second-best response to poor institutional quality, supporting the conforming activity. Using instrumental variable panel regression in the context of Indonesia, we evidence the mediating effect of bribing on the relation between local institutional quality and new business density, thus unveiling the real effect of institutional quality on entrepreneurship.

Keywords: Entrepreneurship; Institutions; Corruption; Mediation; Indonesia (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-sea
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Published in Eurasian Business Review, Springer, 2020, 10 (1), pp.97-121. ⟨10.1007/s40821-020-00151-z⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02511782

DOI: 10.1007/s40821-020-00151-z

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