Interactive Effects of Business Environment Assessment and Institutional Programs on Opportunity Entrepreneurship

Abstract

The study of the institutional characteristics that create favorable environments for opportunity entrepreneurship is critical. We seek to determine how government programs intended to support entrepreneurship impact how potential entrepreneurs view the business environment. We evaluate the effectiveness of institutional programs and the interactions between them and market optimism. We conduct a binomial regression to evaluate the probability of opportunity entrepreneurship, given the perceived quality of the business and regulatory environments. The results indicate that both have a significant influence, while the regulatory dimensions interact with the effects of the perceived quality of the business environment. We find that individuals who have optimism regarding entrepreneurship still seek assurance of a positive regulatory environment before they act. We find that those who consider it to contain promising entrepreneurship opportunities still seek a positive regulatory climate and supportive government programs before acting. Programs that create favorable financial access can encourage entrepreneurs attracted by financial returns. Similarly, favorable government programs that ensure expansion and growth may reinforce this financial optimism. Our study also adds to the literature on institutional economics, providing evidence that effective institutional factors require productive behaviors from individuals.