The Impact of Intergovernmental Organizations on Entrepreneurship

Abstract

Intergovernmental organizations (IGOs) aim to promote stability, development, and security for member states and their citizens via supranational institutional influences. However, their role and their impact on individuals has been questioned due to political, social, and economic uncertainties and the high detachment of the supranational IGO level and the individual level. For example, it is not clear how IGOs impact entrepreneurs and their strategic decisions to formalize entrepreneurial activities or remain informal. Thus, we study the impact of IGOs on entrepreneurial decision making, by considering the supranational institutional level, the national institutional ecology, and individual decision making. Through a study of 68 countries, their entrepreneurial environment, and their connection to IGOs, we find that IGOs generally cultivate a positive environment for entrepreneurship. Moreover, IGOs encourage different strategic decisions, i.e., encouraging formal entrepreneurship while discouraging informal entrepreneurship. We argue that a key mechanism of these impacts is the strength of the institutional ecology of member states and find that national institutional environments mediate the relationship between IGOs and entrepreneurship, further reducing informal and enhancing formal entrepreneurship. We combine international relations, institutional theory, and strategic entrepreneurship and interconnect supranational institutions, national institutional ecologies, and the individual’s entrepreneurial decision-making.