Reflection on Institutions and Entrepreneurship Quality

[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.

ETP_72ppiRGB_powerpointDuring 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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Understanding How Business Influences Public Policy

congress-column-1018004_1920[We’re pleased to welcome authors David Coen of University College London and Matia Vannoni of the Università Bocconi. They recently published an article in Business & Society entitled “The Strategic Management of Government Affairs in Brussels,” which is currently free to read for a limited time. Below, Dr. Vannoni reflects on the motivations and innovations of this research:


What motivated you to pursue this research?

Business touches every aspect of regulation and as such, understanding how business influences public policy and how it organizes political affairs is important. While government affairs have been well studied in the US and concepts such as revolving doors are now the accepted norm, we decided to focus on government affairs in the EU and explore how a different political institutional structure and business culture may affect business political action and organization.

As such, we decided it was time someone started to unbox the company and look at what is going on inside. This project seeks to study the day to day functioning of government affairs inside firms, asking questions like: who works in government affairs in companies, where these managers come from (where they studied and where they worked previously), which role they have inside the firm and so on.

In what ways is your research innovative, and how do you think it will impact the field?

Traditional approaches in management, political science and economics help us understand many aspects of corporate political activity, but not how government affairs are organized within the firm. This project studies how the political institutional environment affects the firms’ micro strategic decisions, such as the size, political functions and staffing of government affairs.

The project is innovative in both its data collection and empirical focus. First, the paper seeks to build an original data set on EU business political organization. Previous studies have tended to focus on single case studies and have been US focused. In this project, for the first time, we create a sample of more than 300 companies from different countries and industries and, by relying on different sources, we map their EU corporate political activities and the organization of their government affairs. We gathered data on how much companies spend in lobbying activities, whether they use external consultancies, how many individuals they employ in their government affairs office, who these individuals are, what their functions are and so on. As such, this is the first study of this kind.

It terms of findings, we show that in Brussels we see less “revolving doors” between business and EU institutions, rather the process is more a “sliding door” mechanism, where influence is a function of expertize, credibility and reputation. As such, the staff in government affairs is more likely to be technical experts, with long run careers in the industry rather than former politicians and civil servants.

What advice would you give to new scholars and incoming researchers in this particular field of study?

The advice we give to new scholars who wish to study corporate political activity is to always try to create bridges between disciplines, both theoretically and empirically. For instance, this project bridges the gap between the political science literature on lobbying and the management literature on capabilities. Yet, this is not enough. Future research in this field should continue this cross-fertilization, by, for instance, looking at how the public management literature might help explain the interaction between business and society. At the empirical level we would encourage the collection of large-N data, increased comparative research and potentially the introduction of experiments, which are currently in vogue in public management.

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Monument photo attributed to ssalae. (CC)

Climate Change: Is It Too Late?

Editor’s note: Dr. Thomas Sterner, Professor of Environmental Economics at the University of Gothenburg and Visiting Chief Economist at the Environmental Defense Fund, also co-authored the op-ed “Rio Isn’t All Lost” on June 18 in The New York Times, focusing on the “seeds of an energy revolution” that may help us solve the climate crisis.


Even before the Rio+20 Earth Summit ended on Friday, critics had deemed it a failure, calling it “too little, too late.” But a New York Times op-ed coauthored by top environmental leaders offers a different perspective:

Rio+20 is a catalyst. It is the starting point for change, not the finish line. It is a call to action for all of us who now realize that we can’t just rely on government negotiators or verbose and hyper-compromised documents to save our planet.

Today, we present a selection of articles offering good reasons to answer that call, along with strategies for moving forward in the race against climate change.

Mark C. J. Stoddart of the Memorial University of Newfoundland, D. B. Tindall of the University of British Columbia, and Kelly L. Greenfield of the Memorial University of Newfoundland published “‘Governments Have the Power’? Interpretations of Climate Change Responsibility and Solutions Among Canadian Environmentalists” in the March 2012 issue of Organization & Environment.

Cynthia E. Clark and Elise Perrault Crawford, both of Bentley University, published “Influencing Climate Change Policy: The Effect of Shareholder Pressure and Firm Environmental Performance” in the March 2012 issue of Business & Society.

Thomas Sterner of the University of Gothenburg, Maria Damon of New York University, Gunnar Köhlin of the University of Gothenburg, and Martine Visser of the University of Cape Town published “Capacity Building to Deal With Climate Challenges Today and in the Future” in the March 2012 issue of The Journal of Environment & Development.

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A Just Cup of Coffee: From Fair Trade to Human Happiness

Photo used in the Journal of Macromarketing with permission of TransFair USA.

As public awareness and advertising have increased, fair trade coffee has gathered mainstream appeal, but what are its real-life impacts on the economy, sustainability, and human well-being?

For today’s post, we’ve compiled an assortment of articles that study coffee and community from a marketing and political economy perspective. The Review of Radical Political Economics takes us to Uganda’s Mirembe Kawomera (“Delicious Peace”) cooperative, arguing for the economic rationality of promoting community rather than consumerism; the Journal of Macromarketing looks at the fair trade coffee movement’s effects on quality of life for participants in Nicaragua, Peru, and Guatemala; and The Journal of Environment & Development examines the global coffee sector as a venue for social and environmental certification initiatives.

We hope you find this selection insightful and thought-provoking.

Nancy Neiman Auerbach of Scripps College

Delicious Peace Coffee: Marketing Community in Uganda

Review of Radical Political Economics (April 4, 2012)


Stephanie Geiger-Oneto and Eric J. Arnould, both of the University of Wyoming

Alternative Trade Organization and Subjective Quality of Life : The Case of Latin American Coffee Producers

Journal of Macromarketing (April 19, 2011)


Graeme Auld of Carleton University

Assessing Certification as Governance: Effects and Broader Consequences for Coffee

The Journal of Environment & Development (June 2010)


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Revenue Structure and Nonprofit Borrowing

Revenue Structure and Nonprofit Borrowing”, by Wenli Yan of Indiana University, Bloomington, Dwight V. Denison and J.S. Butler, both of the University of Kentucky, was the most frequently read article in Public Finance Review in 2009. Dr. Yan has provided additional background to the article:

My interest in this topic originates from my readings on portfolio theory in the Principles of Corporate Finance when I was a second-year doctoral student in the Martin School of Public Policy and Administration at the University of Kentucky. I was fascinated by the idea of lowering the risk of return by combining different stocks that do not move exactly in the same direction in an investment portfolio. This ignited my interest in exploring whether nonprofit organizations can use a similar strategy, lately known as revenue diversification, to effectively reduce the uncertainty of revenue streams. In years after my initial exposure to portfolio theory, I devoted myself to reading a broad range of literature on revenue diversification and portfolio management from corporate, nonprofit and public finance. I was surprised to find that many important empirical and theoretical questions regarding the dynamics between revenue mix and capital structure remained unanswered.  I viewed this as a unique opportunity to contribute to the literature and enhance our systematical understanding of revenue diversification and its application in nonprofit organizations, which I believe, can benefit their financial practices and performance in the long run. The popularity of this research shows the value of conducting cross-discipline research.

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