(Individual and Institutional Dynamics of Innovative Entrepreneurship: A Multilevel Analysis)

Abstract

Purpose – Most researchers link entrepreneurial attitudes and behaviors to individual differences, and ignore effects related to the contex surrounding the individual. This study examines the individual and country level determinants of innovative entrepreneurship. Design/methodology/approach – Based on extant literature, this study develops a multilevel framework that links individual level social-psychological determinants and country level institutional determinants to the likelihood that an early-stage entrepreneur is involved in an innovative entrepreneurial activity. To analyze this framework, a hierarchical data set that merges micro level entrepreneurial data from the Global Entreprenuership Monitor with country-level institutional data from the Fraser Institute was used. The final data set consists of 87502 observations from 77 countries. The hypotheses were tested by utilizing multilevel (mixed-effects) logit regression estimation technique. Findings – The results indicate that at the individual level entrepreneurial self-efficacy, experience and fear of failure are strongly related to the likelihood that an individual entrepreneur is involved in an innovative entrepreneurial activity. We also find strong evidence that innovative entrepreneurial activity increases with both bureaucratic efficiency and government support for entrepreneurship. On the other hand, property rights protection does not seem to be related to the probability that an entrepreneurial activity is innovative. Discussion – Overall, the results suggest that not only the individual characteristics but also the institutional context matters for entrepreneurial activity. The results underscore the the critical role that institutions play with respect to individual economic behavior and hence economic development.