When Institutions Guide Resources: How Finance, Education, Trust, and Culture Shape Entrepreneurship

What is it about?

This study explores how financial, human, and social capital influence entrepreneurial activity across countries and how these effects depend on formal and informal institutions. Drawing on institutional theory, it argues that while access to financial resources, education, and networks promotes entrepreneurship, their impact is shaped by context. Financial and educational systems serve as formal institutions offering structural support, whereas trust and cultural values act as informal institutions shaping social norms and attitudes toward entrepreneurship. Using data from 32 countries, the study shows that individuals with greater financial, human, and social capital are more likely to engage in entrepreneurship, though the strength of these effects depends on institutional context. Strong financial and educational systems amplify the benefits of personal resources by improving access to funding and skills. Likewise, societal trust fosters collaboration and resource exchange, while hierarchical and conservative cultural values weaken these effects by discouraging risk-taking and openness to new ideas. These findings highlight that entrepreneurship is shaped by an intricate interplay between individual resources and institutional contexts. Strong financial and educational infrastructures empower individuals to use their capabilities effectively, while trust and open cultural norms foster the social conditions necessary for entrepreneurial success. Policymakers aiming to stimulate entrepreneurship should therefore balance economic and institutional reforms with initiatives that build trust and promote cultural flexibility, ensuring that both formal and informal institutions support opportunity creation.

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Photo by Gavin Li on Unsplash

Photo by Gavin Li on Unsplash

Why is it important?

This research uniquely analyzes how financial, human, and social capital interact with four institutional moderators—financial systems, educational systems, trust, and cultural values—to shape entrepreneurship across countries. By integrating formal and informal institutions in one framework, it advances institutional theory and shows how resource-based advantages depend on context. The model bridges micro and macro perspectives, explaining how national environments enable or constrain the conversion of individual resources into start-up activity. The study is particularly timely as nations seek to promote entrepreneurship in the face of global economic uncertainty and institutional change. Conducted across 32 countries, it underscores that the success of entrepreneurship policy depends on strengthening both the formal institutional infrastructure—such as finance and education—and the informal social fabric of trust and open cultural values. The findings suggest that fostering entrepreneurship requires not only investing in resources but also cultivating the institutional and cultural conditions that allow those resources to thrive.