Abstract

Kirzner (1997) and Shane and Venkataraman (2000) implied that opportunity discovery is solely regulated by the distribution of knowledge in social systems. We pursue a systematic analysis of how a prospective entrepreneur’s national context influences the innovativeness of his or her startup attempts. We develop a theoretical framework that explicates the effect of formal institutions on the degree of innovativeness of new firm entries in a given country. Formal institutions represent institutions that are codified in laws and regulations – e.g., a country’s intellectual property protection regime (Scott, 2001). We propose that such institutions not only influence what individuals search and see, but also, how they react to what they see (e.g., Hwang & Powell, 2005; Thornton, 1998). Therefore, different institutional environments should produce differentially innovative entrepreneurs. In this paper, thus, we contribute to a better understanding of the link between entrepreneurship and innovation by focusing on the cross-level moderating effects of countrylevel institutional attributes on the innovative dispositions of entrepreneurs across countries.

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