Does institutional inefficiency encourage entrepreneurs to adopt effectuation logic in strategic business decision

Abstract

The institutional setup of a country defines the boundaries for businesses, allowing for certain courses of action whilst restricting others. It provides system signals to entrepreneurs, which are interpreted during their decision-making. A firm needs to pass through the institutional setup of its home and host countries when it extends its operation outside the domestic market. Therefore, the efficiency of the home and host institutions plays a significant role in terms of the decision-making logic that entrepreneurs' adopt during their decision to internationalise. The efficiency of local institutions can cause entrepreneurs to adopt a certain decision-making logic while inefficient local institutions can force entrepreneurs to adopt other types. This paper examines the relationship between perceptions of institutional efficiency and entrepreneurial effectuation logic. The study tested the hypothesis using a sample of 101 Bangladeshi software entrepreneurs. The data were collected by applying a structured questionnaire. The data analysis was conducted by implementing a partial least squares (PLSs) structural equation modelling. The result of this study supports the assumption that the perception of institutional efficiency has an impact on entrepreneurial effectuation logic.