Abstract

This study aims to determine whether big business or institutions comprise a more significant entrepreneurship determinant. In addition, we have three subobjectives: We examine (1) how the relationship between big businesses and entrepreneurship changes according to the economic development stage; (2) if big businesses affect the two different entrepreneurship types, namely, opportunity- and necessity-driven entrepreneurship, differently; and (3) which institutional factors are effective for these two different entrepreneurship types. To this end, we compare the effects of big businesses and institutions on entrepreneurship among 33 countries covering lower-middle-, upper-middle-, and high-income countries during the 2001–۲۰۱۵ period. Among the various determinants of entrepreneurship, we focus on two key factors that affect entrepreneurship, namely, big businesses and institutions while controlling for the demand- and supply-side factors that influence entrepreneurship. This study conducts fixed-effect estimations. We find that the relationship among entrepreneurship, big businesses, and economic development is “N-shaped.” In particular, there is a positive relationship between big businesses and opportunity-driven entrepreneurship in high-income countries. Moreover, among the various institutional factors, only supportive public policies toward new firms and positive social perceptions toward entrepreneurs are effective for opportunity-driven entrepreneurs, whereas none of the institutional factors are effective for necessity-driven entrepreneurs.

Introduction

Because entrepreneurship has come to be regarded as a vital element of a nation’s economic development (Huang et al., 2022; Méndez-Picazo et al., 2021; Urbano et al., 2019; Audretsch, 2018, 2007; Schumpeter, 1934), understanding the main factors driving entrepreneurship has become essential. Previous studies have uncovered various explanatory variables influencing entrepreneurship, including (1) economic factors (e.g., gross domestic product [GDP] and globalization), (2) institutions (e.g., tax policy and corruption), (3) culture (e.g., social and religious beliefs), (4) legal systems, and (5) geography (e.g., coastal and temperate zones). Currently, studies on the effects of digital technologies (Dana et al., 2022; Yang et al., 2021) and artificial intelligence (Obschonka & Audretsch, 2020) on entrepreneurship have been conducted. Among these determinants, in studying entrepreneurship within or across countries, the broad connection between entrepreneurship and various institutional factors constitutes a critical research area (Audretsch et al., 2021; Goduscheit et al., 2021; Carbonara et al., 2016; Lu & Tao, 2010; Acs et al., 2008). In particular, institutions influence the choice of opportunity- and necessity-driven entrepreneurship (Audretsch et al., 2021). Given this importance, this study regards institutions as an essential factor that influences entrepreneurship.

In contrast to the existing literature, this study’s primary emphasis is on a new variable, that is, the role of big businesses. The role of big businesses has been importantly emphasized not only in the rise of current advanced economies in prominent studies such as Chandler (1990) but also in the context of newly emerging economies as a crucial vehicle for achieving rapid economic growth (Chandler & Hikino, 1997). In particular, Lee et al. (2013) pointed out a positive causal relationship between the number of big businesses and economic growth after controlling for the endogeneity that a larger economy is expected to generate more large firms than a small economy. Moreover, big businesses contain unique information that is commonly related to economic growth (Lee et al., 2013; Chandler & Hikino, 1997; Chandler, 1990, 1959; Schumpeter, 1934). Historically, large industrial firms have played a leading role in booming global economies and the upgrading of industrial structures (Chandler & Hikino, 1997). Because growth has a path-dependent tendency, it can be inferred that the leading players of the Fourth Industrial Revolution are big businesses. Despite the importance of big businesses in a country’s economy, the role of big businesses in country-level entrepreneurial activity has remained unexplored. Although some studies have investigated the spillover effect of big businesses, they are limited to the study of corporate entrepreneurship1 (Urbano et al., 2022). Consequently, we consider the presence of big businesses as a predictive factor for entrepreneurship and compare this factor with the spillover effect of institutions.

Summary and conclusions

In summary, this study finds that the roles of big businesses and institutions in entrepreneurship have three interconnected aspects as follows: (1) A basic and negative relationship exists between big businesses and entrepreneurship. Specifically, an increasing share of large firms negatively affects both overall and opportunity-driven entrepreneurship, while it does not affect necessity-driven entrepreneurship. These findings hold when not considering the stage of economic development, thus supporting Hypothesis 1-a; (2) Among the various institutional factors, supportive public policies for new firms prove to be effective for fostering opportunity-driven entrepreneurs. Moreover, positive social perceptions toward entrepreneurs positively affect opportunity-driven entrepreneurship. However, none of the institutional factors appears effective for necessity-driven entrepreneurs. These empirical results support Hypothesis 2; (3) In lower-middle-income economies, an increase in the relative presence of big businesses is accompanied by a rise in necessity-driven entrepreneurship. In upper-middle-income countries, both necessity- and opportunity-driven entrepreneurship decrease as the proportion of big businesses in the economy increases. In high-income economies, an increase in the relative presence of big businesses leads to an increase in opportunity-driven entrepreneurship. These results precisely support Hypotheses 3–۵٫ The threefold effect outlined above can be viewed as a partial answer to which actor, that is, big business or institutions, is a more critical determinant of entrepreneurship, which is our core research question. The answer is that as the economy develops, big businesses play a more important role in entrepreneurship, especially in the fostering of opportunity-driven entrepreneurship.