How Institutions Matter in the Context of Business Exit: A Country Comparison Using GEM Data and fsQCA

Abstract

AbstractDespite evidence of substantial differences in business exit rates across countries, understanding of the institutional conditions contributing to those differences is still incomplete. Methodological limitations have left considerable gaps in our understanding of business exit, due to the dominance of regression models that capture institutional conditions in isolation, but fall short of identifying complex combinations of conditions. Using Global Entrepreneurship Monitor (GEM) data and a fuzzy‐set qualitative comparative analysis (fsQCA) of a sample of 54 case countries, we utilize a configurational approach to examine how different combinations of regulatory, normative and cultural‐cognitive institutional conditions lead to variations in business exit rates across countries at different stages of economic development. Further, we identify distinct recipes leading to business exit that are associated with the presence or absence of high business exit rates across countries. The study contributes to institutional theory as well as the business exit literature not only by discussing which combinations of institutions determine when exit is beneficial and detrimental to the economy, but also which specific combinations apply across sets of countries.