Institutions, individual level factors and entrepreneurial entry: the case of South Africa

Abstract

In this paper we study the differential impact of institutions (regulatory burden and rule of law) and individual level factors (human, social and financial capital) on the quality of entrepreneurial entry i.e. opportunity based versus necessity based entry in South Africa. We employ theories on strategic entry, signalling and employment choice theories and develop a set of hypotheses on the differential impact of the rule of law and regulatory burden and individual (human, social and financial capital) on opportunity based and necessity based entrepreneurial entry. We utilize a pooled sample of surveys taken from 2001 to 2007 with South African adults between the ages of 18 and 65. Our findings show that whereas individual-level factors are relatively more important for opportunity based entrepreneurial entry, necessity based entrepreneurial entry is particularly sensitive to institutional level factors, and still adversely skewed against the previously disadvantaged populations groups such as women. We draw implications for entrepreneurs, policy makers and for further research.