National culture, institutions and economic growth. The way of influence on productivity of entrepreneurship
| Pages | 331-351 |
| Published date | 02 November 2015 |
| DOI | https://doi.org/10.1108/JEPP-11-2014-0040 |
| Date | 02 November 2015 |
| Author | Nataliia Ostapenko |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
National culture, institutions
and economic growth
The way of influence on productivity
of entrepreneurship
Nataliia Ostapenko
Department of Strategy and Entrepreneurship, Comenius University in
Bratislava, Bratislava, Slovak Republic
Abstract
Purpose –The purpose of this paper is to examine the potential pathway of influence of formal and
informal institutions and economic development on the business productive behaviour at the national level.
Design/methodology/approach –In the paper SEM models and regression analysis are used to
define the causal relationships. Using data from cultural dimensions of Hofstede, Inglehart and
Tabellini, proxies for formal institutions and economic development this research empirically examines
the way of influence of these factors on entrepreneurship performance in the national economy.
Findings –This paper demonstrates that, stimulating by the economic growth, formal and informal
institutions could affect business productive behaviour at the macro level in both direct and indirect
ways through each other. Formal and informal institutions were found to act as substitutes.
The author argues that the decision to act productively is not just a result of the formal institutional
framework –“bad”outcomes of business development may also be a consequence of the activity of
certain informal institutions as well as caused by poor levels of national economic development.
Practical implications –Based on the findingsof this research it is possible to improvethe methods
of formation of stimulation policy for driving business behaviour in a productive way by taking into
account existingformal and informal institutionsand the level of development of the nationaleconomy.
Originality/value –This paper by using SEM techniques examines the causal relationships between
the quality of formal and informal institutions and productivity of entrepreneurs at the national level.
Keywords Causality, National culture, Economic development, Informal institutions,
Formal institutions, SEM model
Paper type Research paper
1. Introduction
In the process of establishing rules and regulations for encouraging economic development
in general, and the business sector in particular, politicians and economists to a small
extent taking into account the influence of informal rules rooted in the national economy.
Simultaneously, informal institutions are unique to a particular model of the national
economy and the impact of these institutions may negate the effect of any law, which could
lead to an institutional trap and reduce the efficiency of development of the national
economy (Polterovich, 2001). The sociocultural environment influence entrepreneurial
attitudes and motives, the resources that can be mobilized as well as the constraints and
opportunities on/for starting and running a business. North (1990) similarly emphasized
that informal constraints are not merely appendages of formal institutions, but rather are
important in and of themselves given evidence that the same formal rules and/or
constitutions imposed on different countries lead to different outcomes. Journal of Entrepreneurship and
Public Policy
Vol. 4 No. 3, 2015
pp. 331-351
©Emerald Group Publis hing Limited
2045-2101
DOI 10.1108/JEPP-11-2014-0040
Received 13 November 2014
Revised 12 March 2015
28 March 2015
Accepted 28 March 2015
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
JEL Classification —Z10, E020, D210
The author thanks the editor of the journal and two anonymous reviewers for useful comments
and recommendations.
331
Influence on
productivity of
entrepreneurship
1.1 Problem definition
Meanwhile, the way of influence of informal institutions on the business development
and behaviour of entrepreneurs has not been studied at the full extent. Scientists
investigated mainly direct impact of informal institutions on business and economic
development (Autio et al., 2013; Pinillos and Reyes, 2011; Stephan et al., 2015; Wennberg
et al., 2013; Zhao et al., 2012), but the indirect impact has not gotten coverage in the
scientific literature. In addition, the authors usually empirically test only some specific
measures of formal institutions or national culture, but not all of them simultaneously.
This is a gap in the literature because the effects of some indicators of institutional or
economic environment could negate the effect of others, which could lead to a problem
of simultaneously and endogeneity.
To fill this gap the purpose of this analysis is to empirically define potential
pathways of causal relationships of both formal and informal institutions as well as
economic growth concurrently and their influence on the productive entrepreneurship.
The rest of the paper is structured as follows: Section 2 introduces the topic by
reviewing literature; the Section 3 is devoted to the conceptual framework; the Section 4
describes methodology; the Section 5 is devoted to empirical results; the Section 6
covers discussion and in the Section 7 conclusions and limitations are presented.
2. Literature review
According to Baumol (1990), entrepreneurial activity can be productive, unproductive
and even destructive, depending on the institutional environment of the national
economy. Formaland informal institutions stimulateentrepreneurial potential andshape
the behaviour and actions of entrepreneurs. Therefore, good institutional environment
leads the entrepreneurs’effort into productive outcomes. In each case entrepreneur will
weigh the incentives presented inthe environment, both in the form ofregulations as well
as in terms of the prevailing cultural values and norms (Aidis et al., 2007).
2.1 Formal institutions
In institutional terms, enterprise behaviour is understood as a reaction to inadequate
formal and informal institutions, leaving little scope to explain an emergent beha viour
(Welter, 2002). When two economies have similar social and legal systems, they will
influence business behaviour and strategic decision making in the same way (Hessels
and Terjessen, 2010). Urban (2007) noted that there are significant differences between
entrepreneurial rates of different groups, which may occur in spite of relatively modest
differences among their economic and institutional characteristics.
2.2 Economic growth
Based on the findings of Inglehart and Welzel (2005) the economic development has a
predictable effect on culture and social life. These authors created a model “economic
growth-institutions-culture”and defined that economic development could affect the
formation of better institutions what in turn lead to slow changes in the national
culture. It would be rational, therefore, to test the way of influence of economic growth
on the entrepreneurship behaviour.
2.3 National culture as an informal institution
Culture is a comprehensive system of meanings, symbols, values and assumptions about
what is good or bad, legitimate or illegitimate, which underlies the practices and norms in a
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