Moderating Effects of Informal Institutions on Social Entrepreneurship Activity

Abstract

Using the legitimacy lens from institutional theory and a multi-level analysis of 29,175 Global Entrepreneurship Monitor respondents from 16 countries, we examine how national culture and societal attitudes influence individual level decisions to allocate entrepreneurial talent into revenue generating and not-for-profit social enterprises. We find the stigma of business failure to be positively associated with the probability that individuals will invest their entrepreneurial talents into a social venture. We also find that in both performance-based cultures and socially supportive cultures, the positive effects of the stigma of business failure on social entrepreneurship entry are decreased. Our findings suggest that informal institutions significantly influence the revenue generating-strategy of social entrepreneurship. However, they have no significant correlation to the nonprofit-strategy of social entrepreneurship. These findings underscore the complexity of balancing the competing logics of profit maximisation with social value maximisation in the decision to organise start-ups as social enterprises.