Of free markets and a secular mind: the value of economic decentralization and individual secular values in entrepreneurship

Abstract

Building upon Hayek’s seminal work regarding the benefits of market decentralization, in this study, we examine the complementary role of an individual’s secular values in further explaining the association between decentralization of economic affairs, entrepreneurial activity, and self-employment. We argue that studies on Hayek’s notion of decentralization may be incomplete in their conceptualization without a transition to individual morality based on more secular values. We consider decentralization of economic affairs and secular values to explain why entrepreneurial activity differs across countries. In study 1, we find that the decentralization of economic affairs increases the odds of being an entrepreneur in a startup, but does not influence the likelihood of owning/managing a business or perceptions related to the opportunity to start a business. In study 2, we find evidence of mixed support for decentralization and self-employment; however, with meaningful effect sizes but with marginal significance, we find that an individual’s secular values complement the association between decentralization of economic affairs and self-employment. The findings are robust to alternate specifications. By demonstrating the role of secular values in strengthening decentralization, we lay the foundation for melding economic perspectives with the freedom from religious ethos as an important consideration for entrepreneurial activity. However, the mixed effects of decentralization on different modes of entrepreneurship also call into question the value of decentralization in modern economies. Plain English Summary Higher levels of individual secular values, even by a small amount, enhance the benefits that economic decentralization can have on entrepreneurial activity. In this paper, we use a two-study approach to examine how individual secular values might influence the effects of economic decentralization on entrepreneurial activity. In study 1, we find that the decentralization of economic affairs increases the odds of being an entrepreneur in a startup, but does not influence the likelihood of owning/managing a business or individual perceptions related to existing opportunities to start a business. In study 2, we find evidence of mixed support for the effects of economic decentralization on self-employment. However, we find some evidence suggesting that an individual’s secular values complement the association between decentralization of economic affairs and self-employment. Thus, the principal implication of this study is that policymakers should take into consideration the overall secular values present in society when making decisions regarding economic decentralization, particularly with regard to understanding the potential effects that decentralization could have on entrepreneurial activity.