Institutional quality, conforming and evasive entrepreneurship

Julien Hanoteau (1, 2) , Virginie Vial (3)

1 KEDGE Business School [Marseille]
2 AMSE - Aix-Marseille Sciences Economiques
3 IAO - Institut d'Asie Orientale

In this article, we unpack Baumol’s (J Polit Econ 98(5):893–921, 1990) theory of entrepreneurship’s outcomes (productive, unproductive, and destructive) in a framework of failing institutions, considering that entrepreneurship is instead first characterized by two non-mutually exclusive types of behavior (conforming versus evasive). We hypothesize that the evasive activity (firm-level corruption) is undertaken as a second-best response to poor institutional quality, supporting the conforming activity. Using instrumental variable panel regression in the context of Indonesia, we evidence the mediating effect of bribing on the relation between local institutional quality and new business density, thus unveiling the real effect of institutional quality on entrepreneurship.

Keywords: Entrepreneurship; Institutions; Corruption; Mediation; Indonesia

Domains: Humanities and Social Sciences; Economics and Finance

Julien Hanoteau, Virginie Vial. Institutional quality, conforming and evasive entrepreneurship. Eurasian Business Review, 2020, 10 (1), pp.97-121. ⟨10.1007/s40821-020-00151-z⟩. ⟨hal-02511782⟩