Effects of Informal Institutions on the Performance of Microenterprises in the Philippines: The Mediating Role of Entrepreneurial Orientation

Abstract

The study investigates the effects of informal institutions and entrepreneurial orientation on the performance of microenterprises at the subnational level within a developing country context. Using structural equation modeling based on a large-scale survey of 735 microenterprises in the Philippines, it is found that informal institutional factors and entrepreneurial orientation are associated with firm performance. However, further analysis reveals a strong mediating role of entrepreneurial orientation on the informal institutions-firm performance relationships. This finding is novel and adds to our understanding of the mechanism through which informal institutions affect firm performance, particularly for microenterprises in developing countries.

Keywords:

• informal institutions
• subnational culture
• entrepreneurial orientation
• performance
• microenterprises
• the Philippines

ACKNOWLEDGMENTS

The authors are grateful to Associate Professor Val Lindsay, Professor Nicholas Ashill, and Dr. Antong Victorio of Victoria University of Wellington, New Zealand for their expert guidance in the conduct of the research project which provided the empirical data for this article.

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