National culture, institutions and economic growth

Abstract

Purpose– The purpose of this paper is to examine the potential pathway of influence of formal and informal institutions and economic development on the business productive behaviour at the national level.Design/methodology/approach– In the paper SEM models and regression analysis are used to define the causal relationships. Using data from cultural dimensions of Hofstede, Inglehart and Tabellini, proxies for formal institutions and economic development this research empirically examines the way of influence of these factors on entrepreneurship performance in the national economy.Findings– This paper demonstrates that, stimulating by the economic growth, formal and informal institutions could affect business productive behaviour at the macro level in both direct and indirect ways through each other. Formal and informal institutions were found to act as substitutes. The author argues that the decision to act productively is not just a result of the formal institutional framework – “bad” outcomes of business development may also be a consequence of the activity of certain informal institutions as well as caused by poor levels of national economic development.Practical implications– Based on the findings of this research it is possible to improve the methods of formation of stimulation policy for driving business behaviour in a productive way by taking into account existing formal and informal institutions and the level of development of the national economy.Originality/value– This paper by using SEM techniques examines the causal relationships between the quality of formal and informal institutions and productivity of entrepreneurs at the national level.