Islam, institutions and entrepreneurship: evidence from Muslim populations across nations

Abstract

PurposeThe paper is grounded in a comparatively unexplored but growing research interest, which seeks to explain the effect of a country’s religious composition on its economic activity. As an extension of that, this study aims to examine the relationship between Muslim populations and the prevalence of entrepreneurial activity across nations. Integrated with institutional theory, the authors also consider formal and informal institutional variables as contingency factors in this milieu. So, it further investigates if the strategic intervention of formal and informal institutions moderates the relationship between religion and entrepreneurship.Design/methodology/approachThis study uses multi-source data sets from the association of religious data archive, global entrepreneurship monitor and the World Bank. The sample includes 88 countries for analysis, aggregated from 2012 to 2014. The ordinary least squares regression using statistical package for the social sciences (SPSS) Statistics Version 26 is used for the analysis.FindingsThe findings show that Muslim populations are negatively associated with the rate of new business activities in a country, including the formal type of entrepreneurship. However, further analysis reveals that Muslims entrepreneurship is actually driven by necessity and not by opportunity.Practical implicationsThe regulatory environment and entrepreneurial culture are not enough to overcome resistance toward entrepreneurship among Muslims. One possible practical recommendation is to empower religious institutions to preach a clear message supporting participation in economic activities.Social implicationsThis research sheds light on the discrepancy between Islamic religious teaching and eventual behavior of the followers.Originality/valueThis research contributes to both academics and practitioners in several ways. First, it responds to the recent call for more studies on the effect of religious beliefs toward secular organizations by providing empirical evidence on how the prevalence of Muslims in a particular country is associated with levels of entrepreneurship. Second, it adds to the theoretical understanding of the mechanism that explains the relationship between the two. As institutional theory has not been applied extensively in the study of religion and entrepreneurship, it proposes that dynamic institutions play major roles to accelerate or attenuate the effect of Islam on entrepreneurship.