We examine how formal institutions influence the employment growth ambitions of entrepreneurial firms with an explicit focus on how their influence varies for early-stage versus established entrepreneurial firms.
We develop four moderation hypotheses based on a review of research on entrepreneurial growth ambitions and formal institutions. Then, we use comprehensive institutional and entrepreneurship performance data from three large international data sources to examine the hypothesized relations.
Our findings suggest that effective formal institutions promote employment growth for established entrepreneurs in particular. Moreover, we found that ineffective formal institutions hinder employee growth for early-stage firms in particular.
We offer several original implications for policymakers and ecosystem builders seeking to support and encourage the early-stage entrepreneurship that accounts for the majority of new job growth in socioeconomic systems.
