Entrepreneurship, Institutions and Economic Growth : A quantitative study about the moderating effects of institutional dimensions on the relationship of necessity- and opportunity motivated entrepreneurship and economic growth

Abstract: In this thesis we statistically measure if normative and cultural-cognitive institutions moderate the relationship of entrepreneurship and economic growth when the entrepreneurial activity is rooted in different motivations. The types of entrepreneurship which we are measuring, in relation to economic growth, are opportunity- and necessity entrepreneurship. By reviewing the literature we found a general agreement regarding the effect of opportunity entrepreneurship on economic growth while the opinions on necessity entrepreneurship are disparate. Taking institutional theory as the basis for moderation fills in several gaps of the existing literature such as using different types of institutions at the same time or fulfilling the demand for cross-country time series study in both entrepreneurship and institutional research. Regulative institutions are taken into consideration when choosing the countries for analysing. Trust, as a proxy for social capital, is used to measure the moderating effect of normative institutions whilst Power Distance Index and individualism are the measures of cultural-cognitive institutions. Relying on secondary data we used an Ordinary Least Square regression and a repeated measures model for analysis.   In line with previous research we found that opportunity entrepreneurship does not have a significant positive correlation with economic growth, when the effect is measured through the productivity enhancement of labour and technology. Necessity entrepreneurship displayed a significantly negative effect. Furthermore, our results did not show any effect when moderating the different motivations for entrepreneurship with trust, power distance or individualism. At the end of our thesis we elaborate on the possible reasons for our findings and suggest some directions for further research.   The thesis contributes to entrepreneurship research with filling the gaps of cross-country, time series study and providing empirical evidence for the existing theories. It enables to gain a deeper understanding of the relationship of entrepreneurship and economic growth. Regarding institutional research, our thesis places some emphasis on the positive effects of institutional dimensions with relations to entrepreneurial context. It would be very interesting to see more research into the negative aspects of institutions to not only understand what fosters productivity of e.g. innovation and labour, but also burdens it.