Abstract
Recent trends in globalisation have shown significant human migration. Subsequently, diversity in society changes local demographics. Although much research has discussed the effect of diversity on various domestic affairs, little is known about the real impact on business activities, particularly how institutional factors might affect the interaction. This study examines the impact of ethnic, religious, and linguistic diversity on the rate of entrepreneurial entry by considering the institutional context, both formal and informal, as the boundary conditions. Analysing multisource data from 88 countries aggregated between 2010 and 2014, we found that ethnic and linguistic diversity impedes business formation, in contrast to religious diversity which spurs entrepreneurial entry. In addition, institutional variables of control of corruption, trust, and entrepreneurial culture are positively related to entrepreneurship. Lastly, the effects of diversity on entrepreneurship are moderated by some but not all institutions. This study provides important insights for all stakeholders to address contemporary issues such as labour mobility and migration.
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