Abstract
Our understanding of institutional change and human capital on returnee entrepreneurship is limited. Human capital will influence returnees’ entrepreneurial activity. However, how the influence differs in a changing institution remains unanswered. Based on an established model of self-selection theory in labor economics, we modeled how institutions shaped the comparative advantages of two important types of human capital on returnee entrepreneurship. Using data from an alumni survey, we find that under an institution with more business opportunities, business experience matters significantly, while under an institution with better intellectual property protection, innovation abilities are more important. The results reveal that different factors determine entrepreneurship during different stages of institutional reform, thus addressing the puzzle of how human capital fosters entrepreneurship under changing institutional environments.
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