Informal institutions and technology use by entrepreneurs: An empirical study across 18 emerging markets

Given the increasing relevance of emerging economies in the global economy and the neoclassical argument that technological progress is the main driver of economic growth, the purpose of this paper is to investigate the under-researched role of informal institutions on the likelihood that individuals will enter into technology entrepreneurship in emerging markets.

Since the authors combined individual-level and country-level observations, data were analyzed employing hierarchical linear modeling methods and random-effect logistic regressions to estimate the influence of country-level factors on the likelihood of individuals’ entry into techno-entrepreneurship. The data set comprised 10,280 observations for 18 emerging countries during the 2002-2008 period.

The selected informal institutions relate to techno-entrepreneurship as follows: the size of the shadow economy has a U-shaped relationship; ethnic diversity is positively associated; and ethnic polarization is negatively associated, though the latter is not significant.

The authors did not theorize on cross-level mechanisms through which these informal institutions could influence individual-level attitudes, nor did the authors assess the role of such institutions on general entrepreneurship. However, this paper provides a base for more fine-grained studies.

The authors disseminate novel insights into the particularities of emerging economies since all informal institutions studied here have been negatively associated with the overall economic experiences of developing and least developed countries. In addition, the authors provide a unique contribution by identifying a potential U-shaped relationship between the size of the shadow economy and the likelihood of individuals engaging in techno-entrepreneurship.