Political Ties, Institutional Environment and Opportunity Recognition in a Transition Economy

Abstract

From the perspective of Austrian school of entrepreneurship and institutional theory, we suggest that building and utilizing political ties facilitates entrepreneurial opportunity recognition through acquiring timely institution-related information and government officials' experiential advices in transition economies. A survey of 301 corporate executives in Pearl River Delta district in China supported our viewpoint. In addition, due to the potential substitutive effects between informal guanxi and formal institution environment, we further found political ties' positive association with opportunity recognition is stronger under high level of regulative volatility, but is, unexpectedly, irrelevant with legal enforceability. In conclusion, this article not only highlights the crucial role of institutional theory perspective on social networks and opportunity recognition, but also provides new empirical evidence for understanding opportunity-based entrepreneurship in a transition economy.