The impact of national social capital on business creation rates in the formal vs. informal sectors

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Thi Thanh Thai, M., Turkina, E. and Simba, A. ORCID: 0000-0002-0276-8211, 2020. The impact of national social capital on business creation rates in the formal vs. informal sectors. International Journal of Entrepreneurial Behaviour & Research. ISSN 1355-2554

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Official URL: https://doi.org/10.1108/IJEBR-02-2020-0071

Abstract

Purpose: Through utilising social capital as an overarching concept, the purpose of this article is to investigate cross-country rates of business formation in the formal-vs-informal sectors. Plus, empirically assess the impact of social capital constructs on the national rates of entrepreneurship.

Design/Methodology/Approach: Adopting a regression-oriented methodology, Partial Least Squares, the study used a sample comprising 50 nations. National rates of registered and non-registered business creation were utilised as endogenous variables. To determine the indigenous variables, constructs of social capital were measured which is consistent with the World Value Survey (WWS).

Findings: The results of this study show that in the formal and the informal sectors, social networking enables business creation with varying levels of impact. It establishes that: institutional trust has a negative effect on informal business creation and a positive effect on business registration; interpersonal trust drives entrepreneurship in the informal sector but has less impact on business registration; norms of trustworthiness are related to business registration than informal business creation.

Implications: The findings of this research have theoretical and practical implications. They stimulate academic debate on the application of social capital constructs at the national level. The indications that social capital promotes business formation in both the informal and formal sectors can influence entrepreneurship policy development in many countries.

Originality/value : The originality of the results of this study lies in how it conceptualises social capital as having direct impact on business creation in the informal vs. formal sector. Thus, the findings elevated the conceptualisation of social capital to the national level thereby enhancing knowledge on the entrepreneurship process as well as developmental economics.

Item Type:

Journal article

Publication Title:

International Journal of Entrepreneurial Behaviour & Research

Creators:

Thi Thanh Thai, M., Turkina, E. and Simba, A.

Publisher:

Emerald

Date:

17 August 2020

ISSN:

1355-2554