Killing Dreams or Preventing Nightmares? The Dual Effect of Institutional Quality on the Realization of Entrepreneurial Intentions.

Abstract: The aim of this study isto analyze the influence of institutional quality on the realization process of entrepreneurial intentions. In this analysis a distinction is made between opportunity-based and necessity-based entrepreneurial intentions. Using Ajzen’s Theory of Planned behavior I hypothesized that Opportunity-based entrepreneurial intentions would better translate to actual entrepreneurship than necessity-based entrepreneurial intentions. Moreover, institutional quality was expected to directly influence both types of entrepreneurship and to moderate the realization of both types of intentions to actual entrepreneurship. In order to test these hypotheses, data from the Global Entrepreneurship Monitor, The Heritage Foundation, and The World Bank was adopted, and several regressions have been performed. The outcomes show that opportunity-based intentions and necessity-based intentions translate to entrepreneurship, but that opportunity intentions are not superior in determining levels of entrepreneurship. Moreover, institutional quality has shown to negatively influence necessity intentions, but not opportunity intentions. Finally, Institutional quality negatively moderates opportunity intentions, but not necessity intentions. In conclusion, this study contributes significantly to the literature by exposing this difference in domains in which institutional quality has an effect and by displaying the potential negative effect of institutional quality on realizing entrepreneurial intentions.