How Do Institutions Shape Productive Entrepreneurship Across Levels of Economic Development?

Kun Fu (), José Ernesto Amorós (), Erkko Autio (), Donghyun Park and Yeng-May Tan ()
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Kun Fu: Loughborough University
José Ernesto Amorós: EGADE Business School, Tecnológico de Monterrey
Erkko Autio: Imperial College London
Yeng-May Tan: Xiamen University Malaysia

No 775, ADB Economics Working Paper Series from Asian Development Bank

Abstract: We examine the influence of institutional framework conditions on the productivity potential of new entrepreneurial businesses in advanced and developing economies using primary data from the Global Entrepreneurship Monitor from 2006 to 2022. We combine each economy’s institutional conditions for entrepreneurship with individual-level data on entrepreneurial activity, productivity, and aspirations. We use three measures to proxy for productive entrepreneurship: new product innovation, export activity, and high-growth expectations. The three institutional conditions examined are business regulations, rule of law, and financial conditions. Using a two-stage Heckman model to control for selection bias, we find that an economy’s institutional framework is instrumental in shaping productive entrepreneurship, and the effects are more pronounced in developing economies, with evidence of decreasing returns for advanced economies. The novelty of our analysis is in the use of an extended panel, the use of a multilevel design to appropriately control for individual-level effects, and the exploration of the moderating effect of economic development.

Keywords: productive entrepreneurship; institutional framework conditions; innovation; multilevel analysis (search for similar items in EconPapers)
JEL-codes: L26 O31 O33 O57 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2025-04-24
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0775

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