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

Author

Listed:
  • Fu , Kun

    (Loughborough University)

  • Amorós, José Ernesto

    (EGADE Business School, Tecnológico de Monterrey)

  • Autio , Erkko

    (Imperial College London)

  • Park, Donghyun

    (Asian Development Bank)

  • Tan , Yeng-May

    (Xiamen University Malaysia)

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.

Suggested Citation

  • Fu , Kun & Amorós, José Ernesto & Autio , Erkko & Park, Donghyun & Tan , Yeng-May, 2025. "How Do Institutions Shape Productive Entrepreneurship Across Levels of Economic Development?," ADB Economics Working Paper Series 775, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0775
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    More about this item

    Keywords

    productive entrepreneurship; institutional framework conditions; innovation; multilevel analysis;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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