Country Institutional Environments in Promoting Entrepreneurship: Assessment Based on Developing Economies in Asia

Abstract

Previous studies have shown that institutional environments play an important role in explaining entrepreneurship in a given country. Yet, most of the extant studies focus on samples derived from developed-economies. While some attentions have been given to countries in developing economies, the focus was mainly on a few rapidly developing countries whereas others remain largely under-explored. Moreover, developing countries in the Asian region provides a compelling context to be studied as it espouses different institutional logics. To address these issues, we assess the perceptions of the regulatory, cognitive, and normative institutional dimensions that may promote entrepreneurship in a sample of 701 business students from three Asian’s developing economies: Malaysia, Bangladesh, and China. In general, the overall institutional environments level for Malaysia and China are perceived as favorable for entrepreneurship whereas Bangladesh is perceived as relatively less favorable for entrepreneurship. Moreover, results suggest that there are significant differences in the country’s institutional environments between Bangladesh and Malaysia, as well as between Bangladesh and China. These results revealed important cross-national differences and invariance between the three countries in the same Asian region. Implications for future research and practice are discussed.

Keywords:

• Asia
• Developing Countries
• entrepreneurship
• institutional environment
• institutions

Contributions and limitations

This study has some implications for entrepreneurship and institutional theory as well as public policy. Our aim was to determine the perceived level of favorability in the institutional environment of three dissimilar developing countries (Malaysia, Bangladesh, and China) pertaining to entrepreneurship. In doing so, we contribute to the existing entrepreneurship and institutional literature. The findings provide support to similar studies and enriching the understanding of how different institutional environments affect entrepreneurial endeavors and opportunities. It shows that a favorable country institutional environment will facilitate entrepreneurship whereas a non-favorable country institutional environment constrains entrepreneurship. Second, this study supplements available studies on entrepreneurship in the Asian context. We investigated three different types of countries in the region and have identified the impact of diversified institutional environment on entrepreneurship. Third, policy-makers may learn from the findings that perceptions of government regulations could have important implications for the design and implementation of entrepreneurship programs. Support programs and policies are often designed from the policy-makers’ point of view and may not have a thorough understanding of the real business situations experienced by their targeted users (OECD 2000). Policymakers should focus on creating an enabling environment in which individuals that possess entrepreneurial personality traits can flourish.

While providing some interesting insights into the role of country institutional environments in the context of entrepreneurship, the study has a number of limitations, which may provide the basis for refining further research. First, this study undertook a cross-sectional approach to data collection, and thereby the findings in this research represent a snapshot at one time. Thus, any long-term development in either the perceived institutional forces or indeed the dynamics of its effects on entrepreneurship in the long term was not assessed longitudinally in this study. As countries in particular developing ones are changing and transitioning at a fast pace, institutional profiles of countries can change over time (Peng 2000). Future longitudinal studies could thus assess the developments and changes of institutional environment and entrepreneurship in emerging economies (Gielnik et al. 2015). Second, the data sample was restricted to only three developing economies in the Asia region and thus, it may limit the generalizability of the research findings. There is a need for greater use of multi-country samples that allow an in-depth understanding of these differences that influence a wide range of developing economies.