Entrepreneurial growth aspirations in challenging environment: The role of institutional quality, human and social capital

Abstract

AbstractThe role of formal and informal institutions is crucial in forming growth aspirations. Firms use their resources and personal network, trusting to overcome or compensate for inadequate informal institutions. Transition countries can unlock their growth potential by targeting entrepreneurs with high growth aspiration through policy measures (increasing their level of human capital through a higher quality of educational system, aligning formal and informal institutions, promoting well‐functioning and impartial courts). Entrepreneurs use the informal institutions to complement deficient or inadequate formal institutions. Firm size as an indicator of better access to resources moderates positively the effects of informal institution barriers by having a positive influence on growth aspiration. Training, networking, and trust have a positive effect on growth aspiration and entrepreneurs use these practices in response to institutional deficiencies (inadequate educational systems, inefficient courts and other formal institutions). Policy initiatives should consider small firms as being affected by formal institutions.