Amid the sustainability of entrepreneurs in question, this study aims to examine the role of institutional quality, investor sentiment and uncertainty avoidance in entrepreneurship development in emerging and developed markets.
In the presence of heteroscedasticity, autocorrelation and cross-sectional dependence, the Panel Corrected Standard Error model is used to analyze the data. Feasible Generalized Least Squares and Driscoll–Kraay are used for robustness checks.
Uncertainty avoidance culture turns out to be the most significant factor in promoting new business density. Investor sentiment and uncertainty acceptance together build a bullish environment, boosting entrepreneurship. Although institutions positively affect entrepreneurship, inflexible institutional environments can reverse it. The results slightly differ between emerging and developed markets. Although the impact of institutional quality and uncertainty avoidance, by and large, remains the same, the role of investor sentiment becomes insignificant in emerging economies.
This study highlights that an uncertainty avoidance culture hinders entrepreneurship regardless of a country’s economic and financial status. However, the investor sentiment, especially in developed markets, can foster entrepreneurship. Furthermore, while maintaining reasonable quality regulations and having an effective government, there is a need to maintain transparency in governance.
This study examines the combined effects of institutional quality, investor sentiment and uncertainty avoidance culture on entrepreneurship development. While doing so, it compares the impacts of these critical factors on developed and emerging markets. Examining the impacts of individual dimensions of institutional quality on entrepreneurship and the overregulated institutions provides valuable insights into the specific areas needing attention in each country.
