Speed of pro-market reforms and entrepreneurial innovation

Abstract

This paper examines how pro-market reforms affect entrepreneurial innovation through the lens of the dynamic institution-based view of the firm. We propose that the speed at which changes occur has a positive influence on entrepreneurial innovation. Additionally, we hypothesize that, in highly uncertain environments, entrepreneurs with higher levels of entrepreneurial self-efficacy and those who have recently entered the market are better equipped to respond in terms of innovation. To test our hypotheses, we conduct a multilevel, cross-country analysis using data from the Global Entrepreneurship Monitor for the period 2009–2018, focusing on individual-level measures of entrepreneurial behavior. Our findings largely support our hypotheses, indicating that a high speed of pro-market reforms has a positive effect on entrepreneurial innovation. Furthermore, this relationship is partially mediated by entrepreneurial self-efficacy and is more pronounced among new entrepreneurs compared to established ones.