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Understanding the relationship between institutions and entrepreneurship: A developing country perspective

Abstract:

Research on the relationship between institutions and economic growth has gained strength in recent decades. However, studies that analyze the relationship between entrepreneurship and institutions at the theoretical and empirical level are relatively new and limited. The objective of this paper is to explore at the theoretical level the relevance of using institutional theory to understand entrepreneurial dynamics of developing countries and the need to expand the original categories of Baumol (productive and unproductive/destructive) to include types of entrepreneurial activities inherent to specific contexts of developing countries (formal-informal, legal-illegal, necessity-opportunity) . This paper highlights key theoretical concepts of the institutional theory that could be used at the empirical level to understand the dynamics of entrepreneurship in developing countries. We hope that these institutional elements will contribute to explaining the contradictory and paradoxical findings with regards to the presence of high rates of entrepreneurship and low rates of economic growth in developing countries.