[We’re pleased to welcome authors Dr. Farzana Chowdhury of University of Texas-Rio Grande Valley, David Audretsch of Indiana University, and Maksim Belitski of the University of Reading. They recently published an article in Entrepreneurship Theory and Practice entitled “Institutions and Entrepreneurship Quality,” which is currently free to read for a limited time. Below, Dr. Farzana briefly describes the motivation and significance of their research.
During 2012-2013 a group of researchers from Indiana University came across a continuing debate on the quantity and quality of entrepreneurial activity. We found that most of the studies to date considered it important to consider not just the quantity but also the quality of entrepreneurship because not all entrepreneurship contributes equally to economic activity.
Theory and empirical research suggested that entrepreneurship is an activity related to pursue and exploit market opportunities. These opportunities define the type of entrepreneurship activity which differs significantly across regions and countries. Recent research also debated that firm entry small business growth and other indicators are not necessarily per se good indicators reflecting the quality of entrepreneurship. Thus, we identified the need to develop a standardized and empirically tested measure of the quality of entrepreneurial activity across countries and to find a way how formal and informal institutions could enhance the quality of entrepreneurship.
Over the subsequent year, the authors participated in a professional development workshop (PDW) at the annual meetings of the Academy of Management in Philadelphia on the links between institutions and the individual choice made by individuals to become an entrepreneur. Although important research published in two of the premier scholarly journals in the academic field of entrepreneurship, The Journal of Business Venturing and Entrepreneurship: Theory and Practice had previously analysed this decision, little was known about how entrepreneurship quality is influenced by the corresponding rates of return –- or profit rates – associated with the various types of entrepreneurial activities, which in turn is shaped by the quality of existing political and legal institutions.
Our work focuses on the relationship between the quality of institutions and the quantity and quality of entrepreneurship across countries with different levels of economic development. The research impacts the field of institutional economies and economics of entrepreneurship by combining North’s (1990) institutional theory with Williamson’s (2000) institutional hierarchy approach, Whitley’s (1999) national business systems (NBS) perspective and Baumol’s (1990) theory of the productivity of entrepreneurship to explore the interactive and dynamic relationships between the formal and informal institutions and the quality and quantity of entrepreneurship. From the empirical perspective, the work contributes to understanding what types of institutions should be improved if entrepreneurship policy targets the quality of entrepreneurship activity. Most importantly the strength of the relationship still depends on the level of the country’s level of economic development. Our work provides a ranking of countries in descending order by quantity and quality of entrepreneurial activity which is complementary to the standard measures of entrepreneurial activity provided by the Global Entrepreneurship Monitor.
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