4-5 Page APA Paper

Institutional Theory and Contextual Embeddedness of Women’s Entrepreneurial Leadership: Evidence from 92 Countries by Shumaila Y. Yousafzai, Saadat Saeed, and Moreno Muffatto

Building on GEM research, we develop a multi-level framework that draws on the notion of the contextual embeddedness of entrepreneurship and institutional theory. We examine the mediating role of the vision for women’s entrepreneurship (VWE) on the relationship between the regulatory, normative and cognitive pillars of institutional theory and women’s entrepreneurial leadership (WEL) in 92 countries. Results suggest that the institutional pillars influence VWE. Regulatory institutions, entrepreneurial cognitions, and entrepreneurial norms have a direct and an indirect effect (through VWE) on WEL.

Introduction Identified by the World Economic Forum

(2012) as the “way forward,” women’s entrepre- neurship provides a formidable contribution to the economic development, innovation and wealth creation of many countries (Brush, de Bruin, and Welter 2009). On the global scale, women make up a substantial proportion of the entrepreneurial population. According to the Global Entrepreneurship Monitor (GEM) report on women’s entrepreneurship, in 2012, an estimated 126 million women were starting or running new businesses in 67 economies around the world. In addition, an estimated 98 million were running established businesses (Kelley et al. 2012). Nevertheless, the gender- gap in entrepreneurial activity varies widely across countries, and in some countries women represent a significant yet hitherto unrecognized

source of economic growth (Carter and Marlow 2003; Henry and Kennedy 2003). For example, in Pakistan, women entrepreneurs represent only 1% of this gender’s population, while 40% of women in Zambia are engaged in this activity (Kelley et al. 2012). In response to this, many governments around the world have started to pay attention to the value that woman entrepre- neurs offer to society and the particular needs that they may have. For example, in Mexico, a government program called “Instituto Nacional de las Mujeres” is oriented toward changing cultural perceptions to promote equality between men and women and increasing the visibility of women entrepreneurs by helping them develop their networks (Kelley et al. 2012).

Although the topic of women’s entrepre- neurship has garnered much academic interest in recent years, highlighting the value women

Shumaila Y. Yousafzai is senior lecturer of Strategy in the Cardiff Business School at the Cardiff University, Cardiff, UK.

Saadat Saeed is lecturer of Entrepreneurship in the Essex Business School at the Essex University, Essex, UK.

Moreno Muffatto is professor of Entrepreneurship in the School of Entrepreneurship at the University of Padova, Padova, Italy.

Address correspondence to: Shumaila Y. Yousafzai, Cardiff Business School, Cardiff University, Cardiff, UK. E-mail: [email protected].

Journal of Small Business Management 2015 53(3), pp. 587–604

doi: 10.1111/jsbm.12179

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entrepreneurs offer and the particular needs they may have, the area remains understudied, and the paucity of research on the phenom- enon of women’s entrepreneurship is well documented (Brush, de Bruin, and Welter 2009; Gatewood, Carter, Brush, Greene, and Hart 2003). Past research has explored women’s motivation for starting businesses (Boden 1999; Brush, Wong-MingJi, and Sullivan 1999; Buttner and Moore 1997; Scott 1986; Stevenson 1986), the survival and profitability of women- owned businesses (e.g., Watson 2003; Williams 2004), decisions about business growth (e.g., Morris et al. 2006; Orser and Hogarth-Scott 2002; Shelton 2006) and work-family balance (Adkins et al. 2013; Caputo and Dolinsky 1998; DeMartino, Barbato, and Jacques 2006; Kirkwood and Tootell 2008). Nevertheless, there has been little consideration on the role of contextual embeddedness of female entre- preneurship (Welter and Smallbone 2011).

Furthermore, the entrepreneurship literature tends to focus on a direct relationship between the general conditions and arrangements in the overall entrepreneurial environment (for both male and female entrepreneurs) and women’s entrepreneurial activity. This approach over- looks the critical mediating role of the specific context of women’s entrepreneurship, and ignores research that suggests women’s entre- preneurial activity is contextually embedded in the structural characteristic of a country (i.e., economic, sociocultural and legal environment) and so needs to be interpreted according to the context in which female entrepreneurs operate (Welter 2011; Welter and Smallbone 2011).

Understanding the specific underlying context of women’s entrepreneurial activity is a topic of great significance. Recognizing this, Ahl (2006) highlighted the need for future research to focus on the contextual embeddedness of women’s entrepreneurship by broadening both the research questions as well as the potential explanatory factors that are investigated (Hughes et al. 2012). Drawing on the notion of the contextual embeddedness of entrepreneurship and the insights of institu- tional theory, we propose and test a multi-level model of women’s entrepreneurial leadership (WEL) using GEM data collected in 92 coun- tries. Following previous definitions of entre- preneurial leadership (see for example, Gupta, MacMillan, and Surie 2004; Swiercz and Lydon 2002), we define women’s entrepreneurial lead- ership (WEL) as “the ability of women to

manage resources strategically in order to emphasize both opportunity-seeking and advantage-seeking behaviours in the form of initiating, developing and managing entrepre- neurial activity.” In this study WEL is measured through the “female total early-stage entrepre- neurial activity” using GEM data from 2000– 2012.

By addressing the phenomenon of women’s entrepreneurship from a contextual and institutional perspective, we respond to an overarching critique of entrepreneurship research as having an individualistic focus in which “contextual and historical variables . . . such as legislation, culture, or politics are seldom discussed” (Ahl 2006, p. 605), and restricting the scope of women’s entrepreneur- ship research in particular (Hughes et al. 2012). Hughes et al. (2012, p. 431), quoting Ahl (2006), note that the entrepreneurship litera- ture “by excluding explicit discussion of gendered power structures, [highlights] the apparent shortcomings of female entrepreneurs . . . [and thus] . . . reinforce[ing] the idea that explanations are to be found in the individual rather than on a social or institutional level.” As a consequence, the research puts the onus on women and implies that in order to achieve entrepreneurial success women must change themselves by for example, enhancing their education, management style and networking skills.

Our multi-level measure and analysis tech- niques provide an interactive answer to our research question: how do different institutional arrangements (regulatory, normative and cogni- tive) interact to create a favorable or unfavorable environment for women’s entrepreneurship, i.e., vision for women’s entrepreneurship, which eventually leads to the emergence of WEL? We define vision for women’s entrepre- neurship (VWE) as “a country mental image or picture of women as viable entrepreneurs and its views on the means to accomplish this mental image.” In this study VWE is measured through the GEM’s national expert’s vision on how the state of the indicators in a country results in a favorable environment for women’s entrepre- neurship. Specifically, we present a more nuanced understanding of the women’s entre- preneurship phenomenon by examining the mediating role of VWE on the relationship between regulatory institutions, entrepreneurial norms and entrepreneurial cognitions and WEL. In so doing, we propose and test a new

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framework using a sample of 92 countries in different phases of economic development and cultural contexts as a point of reference for the favourable institutional environment for WEL. We also answer Stenholm, Acs, and Wuebker’s (2011) call to extend research on institutional theory and entrepreneurship to more countries. Figure 1 presents our proposed conceptual model.

Theoretical Background All entrepreneurship is contextually embed-

ded in the social, cultural and political institu- tions which influence the values, norms, motives and behaviours of individuals (Bruton and Ahlstrom 2003; Davidsson 2003; Martinelli 2004; Minniti 2009; North 1990; Steyaert and Katz 2004). Institutional change can create opportunities for potential entrepreneurs by shaping and determining the prospects as well as removing or lowering barriers to market entry and/or exit, and thus can exert a positive impact on entrepreneurial leadership (Gnyawali and Fogel 1994; Hwang and Powell 2005; Smallbone and Welter 2001).

Defying the general consideration of entre- preneurship in either a gender-neutral or a

purely masculine context (Marlow 2002), Brush, de Bruin, and Welter (2009) introduced a gender-aware framework of entrepreneur- ship which took into account specific contex- tual factors as important determinants of women’s entrepreneurial activity. This was an important step toward broadening our under- standing of women’s entrepreneurship as women’s experience added intricate dimen- sions to the decisions about occupations while trying to balance family and financial respon- sibilities (Gilbert 1997). Even today, in many societies women are still defined primarily through their domestic roles associated with family obligations (for example, child rearing, caring for the sick and the elderly, and repro- ductive work) which fall almost exclusively on women, even if they work equal or longer hours than their male partners (Achtenhagen and Welter 2003; Marlow 2002). Following this line of inquiry, we propose a multi-level framework of WEL that draws on the notion of the contextual embeddedness of entrepreneur- ship (Bates, Jackson, and Johnson 2007; Brush, de Bruin, and Welter 2009; Welter and Smallbone 2011) and the insights of institu- tional theory.

Figure 1 Hypothesized Conceptual Model

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Campbell (2004, p. 1) describes institutions as the foundation of social life consisting of “formal and informal rules, monitoring and enforcement mechanisms, and systems of meaning that define the context within which individuals, corporations, labor unions, nation- states and other organizations operate and interact with each other.” Institutional theory is a particularly suitable frame of reference for addressing the external context that shapes women’s entrepreneurial activity. Research has suggested that the institutional environment not only influences the rate of entrepreneurial activity, but also its resulting trajectories (Bruton, Ahlstrom, and Li 2010). The institu- tional framework of a society encompasses the vital role of regulatory, normative and cognitive “pillars” that promote successful entrepreneur- ial activity (Scott 2001, p. 51). Entrepreneurship research spanning the last two decades has drawn on these institutional pillars and sup- ported the contention that institutional differ- ences lead to country-level variations in the structuring and development of entrepreneurial framework conditions (Aldrich 2011; Bruton, Ahlstrom, and Li 2010; Meek, Pacheco, and York 2010; Peng and Zhou 2005; Tolbert, David, and Sine 2011). In the context of women’s entrepreneurship, formal regulatory institutions can create entrepreneurial opportu- nities, influence the extent to which female entrepreneurship can develop and affect the types of enterprises in which women can engage. Informal normative and cognitive insti- tutions have the potential to exert significant influence on the perceptions of entrepreneurial opportunities (Welter and Smallbone 2011). Building on this established research stream, researchers have started to apply institutional theory to explore the institutions that restrain as well as promote women’s entrepreneurial activity (Brush, de Bruin, and Welter 2009; Bruton, Ahlstrom, and Li 2010; De Bruin, Brush, and Welter 2007).

Regulatory Institutions Regulatory institutions represent a rational

actor model of behaviour. This refers to formal imposition, enforcement and acceptance of policies, rules, laws and sanctions that affect individual behavior in organizations and in society (Manolova, Eunni, and Gyoshev 2008; Stenholm, Acs, and Wuebker 2011). Research has shown that regulatory institutions either at organizational-level (e.g., workplace rules,

monitoring scripts and incentives) or at country-level (e.g., centers on rules, monitoring and sanctioning activities providing a frame- work for law enforcing agencies and the courts) can influence the legitimacy and accep- tance of entrepreneurship (Webb et al. 2009).

For example, in the Republic of Korea, the government-enacted “Law to Support Women Entrepreneurs” in 1999 led to the formation of the “Women Entrepreneurs Support Center” which provides financial assistance (loans), training, business incubation and other services (Kelley et al. 2012). In contrast, potential entre- preneurs can be discouraged by lengthy paper work, procedures and rules and reporting to an array of institutions (De Soto 2000). Capelleras et al. (2008) showed that heavily regulated countries will have fewer new firms and they will grow more slowly. Similarly, in countries with unstable regulatory institutions, the uncer- tainty of the regulatory framework (Aidis 2005; Boettke and Coyne 2003), lack of intellectual property rights (Autio and Acs 2010), and extensive corruption and untrustworthy enforcement of regulations (Aidis, Estrin, and Mickiewicz 2008) will increase the opportunity cost for entrepreneurship. In the specific context of women’s entrepreneurship, Jamali (2009) showed that the lack of government support in terms of policy, regulations and legal barriers hindered women’s entrepreneur- ial activity. Similarly, the World Bank’s report on Women Business and the Law (World Bank 2012) showed that in over 75% of the world’s economies, women’s economic opportunities were limited by one or more legal differences between women and men. On the other hand, regulatory initiatives like labor market legisla- tion, formal gender equality recognized by law, tax legislation benefiting dual earners, family and social policies, and an affordable childcare infrastructure can facilitate WEL. Thus, we hypothesize that there is a significant relation- ship between regulatory institutions and WEL in a country:

H1a: WEL in a country is positively related to its regulatory institutions.

Entrepreneurial Norms While regulatory institutions are related to

the formal compliance with rules and laws, the underlying assumptions of entrepreneurial norms are the informal and invisible “rules of the game,” the uncodified values (what is

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preferred or considered proper) and norms (how things are to be done, consistent with those values), held by individuals and organi- zations that influence the relative social desir- ability of entrepreneurial activity and entrepreneurship as a career option (Busenitz, Gómez, and Spencer 2000).

The social acceptability of entrepreneurial careers have been shown to vary across differ- ent countries; some countries facilitate and promote entrepreneurship, while others dis- courage it by making it difficult to pursue (Baumol, Litan, and Schramm 2009; De Soto 2000; Luthans, Stajkovic, and Ibrayeva 2000; Mueller and Thomas 2001; Tiessen 1997). Based on the theory of planned behavior (Ajzen 1991), one can expect that the perceived desirability of entrepreneurial activity in a society will influence individuals’ entrepreneur- ial intentions and result in the planned behav- ior of starting entrepreneurial activity (Krueger, Reilly, and Carsrud 2000). Indeed, research has confirmed that the extent of female participa- tion in new venture activities is predicted by the degree of legitimacy, respect and admira- tion afforded to women’s entrepreneurship (Baughn, Chua, and Neupert 2006). Thus, we propose that women’s entrepreneurial activity will be higher if the entrepreneurial norms of a country warrant that women will be admired and rewarded for their efforts in creating entre- preneurial value for society.

H1b: WEL in a country is positively related to its entrepreneurial norms.

Entrepreneurial Cognitions Entrepreneurial cognitions reflect the nature

of reality and the cognitive frameworks related to individuals’ perceptions of their ability (level of expected performance) and their self-efficacy (that is, the level of confidence in their own skills to start a business) to get involved success- fully in an entrepreneurial activity (Bandura 1982; Krueger, Reilly, and Carsrud 2000). According to Busenitz, Gómez, and Spencer (2000), entrepreneurial opportunities may be legitimized through individuals’ perceptions of their knowledge and skills required for the creation of a new business. Based on the theory of planned behavior (Ajzen 1991), one can expect that the perceived feasibility (perceived behavioral control: Ajzen 1991) of entrepreneur- ial activity in society will influence the entrepre- neurial intentions of individuals and result in the

planned behavior of starting entrepreneurial activity (Krueger, Reilly, and Carsrud 2000). Building on these insights, entrepreneurship research has shown that individuals’ percep- tions of their ability to recognize opportunities and their self-efficacy toward entrepreneurial activity are positively related to enhancing the extent of entrepreneurial activity (Arenius and Minniti 2005; Saeed et al. 2013).

In addition, social capital and social networks have been identified as imporant determinants of the recognition and explotation of entrepre- neurial opportunities (De Carolis and Saparito 2006; Mitchell et al. 2002; Stenholm, Acs, and Wuebker 2011). Research has also shown that the presence or lack of entrepreneurial net- works and role models, and their capability to encourage and maintain a platform for taking part in entrepreneurial activity, is more impor- tant than regulatory institutions (Mai and Gan 2007; Owen-Smith and Powell 2008). Entre- preneurial women, especially in developing countries, suffer from weak entrepreneurial net- works, lack of female entrepreneurial role models, low levels of entrepreneurial and man- agement education, skills training and career guidance, and have limited access to support services, including business development ser- vices and information on business growth (Davis 2012; Drine and Grach 2010; Kitching and Woldie 2004). Furthermore, they face the challenge of gaining access to and control over finances and external sources of capital (Jamali 2009; Minniti 2009) causing them to perceive the environment to be challenging and unsuitable for entrepreneurial activity (Zhao, Seibert, and Hills 2005). As a result, Langowitz and Minniti (2007) found that “women tend to perceive themselves and their business environment in a less favorable light compared to men” (p. 356). Thus, we hypothesize that there is a significant relationship between entrepreneurial cognitions and WEL in a country:

H1c: WEL in a country is positively related to its entrepreneurial cognitions.

Institutional Theory and Vision for Women’s Entrepreneurship (VWE)

In this study, we argue that the VWE will be higher in countries where entrepreneurship in general is highly regarded, entrepreneurial cog- nitions are strong and where regulatory insti- tutions support entrepreneurial activities. This line of reasoning is based on previous research

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which has shown that the VWE is embedded in a society’s support for entrepreneurial activity itself (Baughn, Chua, and Neupert 2006). Previous research has shown that the lack of entrepreneurial norms and the cultural and religious-based societal attitudes in some coun- tries leads to a lack of support for working women in general and for women’s entrepre- neurship in particular (Baughn, Chua, and Neupert 2006; Jamali 2009). For example, Henry and Kennedy (2003) showed that the lack of enterprise culture in Ireland coupled with a very conservative view toward women restricted the level of women’s entrepreneur- ship (Baughn, Chua, and Neupert 2006). Fur- thermore, the direct-effects argument for the impact of the three institutional pillars on entre- preneurial leadership is well established in entrepreneurship literature (Bruton, Ahlstrom, and Li 2010; Stenholm, Acs, and Wuebker 2011). However, in the case of women’s entre- preneurship, a consideration of the specific context demonstrates the mediating influence of the VWE. Peng and Heath (1996) suggested that the interaction of the institutional framework with individuals influenced their decision-making by determining the acceptabil- ity of norms and behaviors in a given society. Following this, we propose that the interaction of individuals in a society with the general institutional framework comprising favourable regulatory institutions, positive entrepreneurial norms and entrepreneurial cognitions will enable the development of a positive VWE. Examples of positive visions include non- discriminatory business practices for entrepre- neurial women, religious beliefs and family values that support women’s entrepreneurial activity, a view of entrepreneurship as not solely masculine activity, and a general positive attitude of society toward women and employ- ment. This vision will, in turn, perform an important mediating role in shaping the rela- tionship between the three institutional pillars and WEL. Specifically, VWE will ensure the emergence of WEL because the extent to which

women’s entrepreneurial activity is recognized to be as legitimate as male entrepreneurial activity will lead to a higher level of women’s entrepreneurship (Achtenhagen and Welter 2003). Legitimacy not only increases the demand and supply of entrepreneurial activity (Lounsbury and Glynn 2001), but also ensures better access to the resources required to support entrepreneurial start-ups and their con- tinued growth (Etzioni 1987). Implicit in this argument is the notion that VWE channels general institutional support for entrepreneur- ship to the emergence of WEL. Indeed, it is not the general institutional support per se but rather its integration of this support leading to VWE that ensures WEL. Thus, we propose the following additional hypotheses:

H2: The VWE in a country is positively related to its (a) regulatory institutions, (b) entre- preneurial norms, and (c) entrepreneurial cognitions.

H3: WEL in a country is positively related to its VWE.

H4: VWE mediates the effects of (a) regulatory institutions, (b) entrepreneurial norms, and (c) entrepreneurial cognitions on WEL.

Methodology We developed a unique and distinctive data-

base of internationally comparative country- level panel data on entrepreneurial activity across 92 countries for the years 2000–2012. Our main source of data was the GEM database, which was developed by the Global Entrepre- neurship Research Association (GERA).1 In addi- tion, we also consulted the Index of Economic Freedom (IEF) and the Doing Business Report (EDBI) from the World Bank Group (World Bank 2004, 2007). Each indicator’s value was normalized to 1 (highest value) and 0 (lowest value). Standardized values were used for the SEM analyses. Study variables and data sources are summarized in Table 1.

1GERA is the largest ongoing research consortium collecting individual- and national-level data on the incidence, determinants, and outcomes of entrepreneurial activity since 1999 (Minniti, Bygrave, and Autio 2006). GEM collects data from two sources: (1) the adult population survey (APS) and (2) the national expert survey (NES). The NES-questionnaire includes standardized measures of experts’ (entrepreneurs, consultants, academics, politicians) perceptions of their country’s entrepreneurial framework conditions and the institutional environment for entrepreneurship. The country experts in the NES-survey have a substantial knowledge of entrepreneurship-related issues (Reynolds et al. 2001).

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WEL was measured using the GEM’s APS data from 2000–2012. We calculated a combined measure of female nascent entrepreneurs (trying to start new ventures but have not paid any wages to anyone for last 3 months) and new female entrepreneurial activity (those who have been in existence for more than 3 months but not more than 42 months), known as female

Total early-stage Entrepreneurial Activity (TEA) (Levie and Autio 2011). This normative data was available for 92 countries. We compiled an eleven-year panel of GEM countries (2002– 2012). For validation analyses and robustness checks, the full 9-year time series was used.

VWE was measured through five questions that approximately 446 experts from 92

Table 1 Exploratory Factor Analysis, Validity, and Reliability

Construct and Source Measures 1 2 3 4 Source

Regulatory institutional arrangements AVE (%) = 54.83 CR = 0.83; α = 0.96

Business freedom 0.85 IEF *Ease of starting up a

business 0.71 EDBI

*Ease of closing a business. 0.71 EDBI *Property rights. 0.68 IEF

Entrepreneurial cognitions AVE (%) = 42.74 CR = 0.80; α = 0.81

*Opportunity perception. 0.82 GEM—APS *Knows an entrepreneur. 0.73 GEM—APS *Skills. 0.71 GEM—APS

Entrepreneurial norms AVE (%) = 49.64 CR = 0.61; α = 0.66

*High status. 0.67 GEM—APS *Media attention. 0.74 GEM—APS *Desirable Career Choice. 0.77 GEM—APS

Vision for women entrepreneurship AVE (%) = 42.90 CR = 0.67; α = 0.88

*There are sufficient social services available so that women can continue to work even after they start a family.

0.87 GEM—NES

*Starting a new business is a socially acceptable career option for women.

0.88 GEM—NES

*Women are encouraged to become self-employed or start a new business.

0.81 GEM—NES

*Men and women are equally exposed to good opportunities to start a new business.

0.80 GEM—NES

*Men and women are equally able to start a new business.

0.60 GEM—NES

% Explained variance 39.69 22.59 10.70 8.08 % Accumulated variance 39.69 62.28 72.99 81.07

*Normalized. KMO = 0.786, Bartlett’s p > .001. The cut-off point was 0.60. APS, Adult Population Survey; AVE, average variance extracted; CR, composite reliability; EBDI, World Bank’s Ease of Doing Business Index (World Bank 2009); GEM, Global Entrepreneurship Monitor; IEF, Index of Economic Freedom (Holmes et al. 2008); NES, National Expert Survey.

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countries were asked in the 2002 to 2012 admin- istrations of the GEM’s NES-questionnaire. The experts were asked to rate their agreement or disagreement on a 5-point Likert scale with the applicability of the following statements to their country: (1) there are sufficient social services available so that women can continue to work even after they start a family; (2) starting a new business is a socially acceptable career option for women; (3) women are encouraged to become self-employed or start a new business; (4) men and women are equally exposed to good opportunities to start a new business; and (5) men and women are equally able to start a new business.

Regulatory institutions were measured through four items. Business freedom was taken from IEF to indicate the overall burden of government regulations set on entrepreneurial and business activities (Holmes et al. 2008). It assesses the procedures, time and cost involved both in starting and closing a business. The Ease of Doing Business Index (EDBI) was con- sulted for measuring the ease of starting and closing a business (World Bank 2009). The ease of starting up a business indicates the effect of the regulatory environment on start-ups in a country by identifying the bureaucratic and legal hurdles that an entrepreneur must over- come to incorporate and register a new firm (e.g., regulations on starting a business, dealing with construction permits, employing workers, registering property, obtaining credit, protect- ing investors, paying taxes, trading across borders and enforcing contracts) (Stenholm, Acs, and Wuebker 2011). The ease of closing a business indicates the effect of the regulatory environment on closing a business through weaknesses in existing bankruptcy law and the main procedural and administrative bottlenecks in the bankruptcy process (Stenholm, Acs, and Wuebker 2011). The property rights measure from IEF assessed the degree to which a coun- try’s laws protect private property rights and the degree to which its government enforces those laws (Arora, Fosfuri, and Gambardella 2001).

Entrepreneurial norms were measured through three variables from the GEM’s APS questionnaire. Following the broad definition of norms from Baughn, Chua, and Neupert (2006), we first measured the status of entre- preneurship in a country through the percent- age of the adult population who agreed with the statement that in their country people

attach a high status to successful entrepreneurs. Second, we measured the level of perceived media attention paid to entrepreneurship through the percentage of the adult population who agreed with the statement that they often see stories in the public media about successful entrepreneurs (Stenholm, Acs, and Wuebker 2011). Third, we measured the percentage of people who agreed with the statement that in their country, most people consider starting a business as a desirable career choice.

Entrepreneurial cognitions were measured through three variables from the GEM’s APS questionnaire to capture the perception of per- ceived business opportunities and the skills necessary for starting a business in the non- entrepreneurial adult population. Following Stenholm, Acs, and Wuebker (2011), we first measured opportunity perception which indi- cates the percentage of the non-entrepreneurial adult population who see opportunities for start- ing a business in the area in which they live. Second, the variable knows an entrepreneur indicates the percentage of the non- entrepreneurial adult population who person- ally know an entrepreneur who started a business in the previous two years. Finally, skills measure the percentage of the non- entrepreneurial adult population who believe that they have the required skills and knowledge to start a business.

Control Variables In testing our hypotheses, we controlled for

the economic development status of a country through its per capita income and domestic growth. Following past studies, we used lagged per capita income which is measured by a country’s gross national income (GNI) per capita expressed in US dollars at Purchasing Power Party (PPP) exchange rates from the World Bank’s World Development Indicators (WDI) database (Bowen and De Clercq 2007; Wennekers et al. 2005). Domestic growth was measured through GDP and to obtain endogenity we used lagged values from the WDI database. Foreign direct investment (FDI) represents the presence of foreign-owned enterprises within a country as a demand-side factor which is likely to influence a country’s level of entrepreneurship (Verheul et al. 2002). This variable was measured through the stock of inward FDI relative to a country’s GDP, the data for which were taken from the FDI database maintained by the United Nations

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Conference on Trade and Development. Finally, we expect a country’s uncertainty avoidance and degree of collectivism to influ- ence its entrepreneurial activity, the data for which were obtained from the GLOBE study (2004).

Results Assessment of Measures

Exploratory factor analysis (EFA) with Varimax-rotation and Kaiser Normalization was conducted to understand the factor structure of the variables. It resulted in four-factors with eigenvalues greater than 1, accounting for 68.58% of the total variance (KMO = 0.786, p < .001, cut off point 0.60). Table 1 reports the EFA results. This factor structure was confirmed through Confirmatory Factor Analysis (CFA). The parameter estimates from the CFA were statistically significant and the chronbach’s alpha reliability measures varied from excellent 0.96 (regulatory institutions) to acceptable 0.65 (entrepreneurial norms). The discriminant validity was assessed by comparing the corre- lations and the square root of the average vari- ance of each construct. Table 2 suggests good discriminant validity, which indicates that the latent variables in the model are independent constructs. Table 2 presents the correlation matrix and summary statistics.

Convergent Validity We followed the method by Stenholm, Acs,

and Wuebker (2011) to test the convergent validity of the three institutional pillars and the VWE through correlation analysis with other measures employed in previous work. We com- pared the regulatory institutions with GEM’s NES data on government policies (ρ = 0.648, p < .001), government support for entrepre- neurship (ρ = 0.545, p < .001), and the financial environment for entrepreneurial support (ρ = 0.583, p < .001). The significant Spearman correlation supports the regulatory institutions measure.

For entrepreneurial norms, we used GEM’s NES questionnaire. Following Stenholm, Acs, and Wuebker (2011), we took country-level data on the national experts’ perception of the entrepreneurial culture measured through the perceived degree of motivation and value (ρ = 0.405, p < .001) and cultural norms and societal support (ρ = 0.413, p < .001). Simi- larly, the Spearman correlations between the entrepreneurial cognitions and the NES’s

degree of skills and abilities for entrepreneur- ship and opportunities perception were posi- tive (ρ = 0.199, p < .001; ρ = 0.473, p < .001 respectively).

We tested the convergent validity of the VWE on the Human Development Report’s gender empowerment measure. It consists of three indicators: (1) male and female shares of parliamentary seats; (2) male and female shares of administrative, professional, technical and managerial positions; and (3) power over eco- nomic resources as measured by women’s and men’s estimated earned income (Purchasing Power Parity, PPP US$) (Schüler 2006). The VWE correlates positively with the gender empowerment measure (ρ = 0.471, p < .001).

Analysis and Results Direct Effects

Regression analysis was performed to test the direct effects of the three institutional pillars on the VWE and WEL. As Table 3 (Model 1) shows, regulatory institutions (β = 0.21, p < .05), entre- preneurial cognitions (β = 0.34, p < .001), and normative institutions (β = 0.14, p < .05) have a positive and significant effect on the VWE. These results support H2a, H2b, and H2c. The results in Model 2 show that regulatory institutions (β = 0.32, p < .001), entrepreneurial cognitions (β = 0.56, p < .001) and normative institutions (β = 0.15, p < .05) have positive and significant effects on WEL. These results support H1a, H1b, and H1c. Among the control variables, domestic growth (β = 0.25, p < .001) and per capita income (β = 0.40, p < .001) are positively related to the VWE, whereas domestic growth (β = 0.12, p < .05) and per capita income (β = −0.18, p < .05) are related to WEL.

Mediating Effect of VWE A three-step regression was conducted to

examine the mediating role of VWE (Baron and Kenny 1986). The regression results in Table 3 show that regulatory institutions (β = 0.32, p < .001), entrepreneurial norms (β = 0.15, p < .05) and entrepreneurial cogni- tions (β = 0.56, p < .001) have positive and significant effects on the WEL (Model 2). Fur- thermore, all dimensions of institutional pillars are positively related to VWE (Model 1). When VWE is entered into Model 3 (Table 3), it shows a positive and significant effect on WEL (β = 0.17, p < .001), supporting H3. The inclu- sion of VWE leads to an increase in the effect sizes of regulatory institutions (from 0.21 to

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JOURNAL OF SMALL BUSINESS MANAGEMENT596

0.25), entrepreneurial cognitions (from 0.34 to 0.43) and decrease in entrepreneurial norms (from 0.14 to 0.10), but remain significant, sug- gesting partial mediation and partial support for H4.

Structural Equation Modelling We examined the robustness of the preceding

results with structural equation modelling (SEM). The first model (SEM1) examined the direct effect of the independent variables on WEL, with the path from VWE constrained to zero. The fit indexes (χ2 [df] = 545.50 [350], CFI = 0.94, and RMSEA = 0.04) suggested a good fit with the data. The second model (SEM2), which involved a full mediation of the effect of the independent variables by VWE, also

showed a good fit with the data (χ2 [df] = 530.67 [353], CFI = 0.94, and RMSEA = 0.04). Model comparisons with the chi-square difference test indicated that SEM2 performed better than SEM1 (Δχ2 [Δdf] = −14.83 [3], p < .001). In SEM2, our results were consistent with the regression analysis results. VWE (β = 0.29, t = 6.93, p < .001), regulatory institutions (β = 0.36, t = 9.50, p < .001), entrepreneurial cognitions (β = 0.56, t = 16.05, p < .001) and entrepreneur- ial norms (β = 0.20, t = 9.50, p < .001) were sig- nificantly related to WEL.

Following Brown’s (1997) and Shrout and Bolger’s (2002) recommendations, we tested the significance of the specific mediation effects as follows: regulatory institutions (total effect β = 2.16, p < .001; direct effect β = 2.51, p < .05;

Table 3 Results of Regression Analysis: Standardized Path Coefficients

(t-Values)

Independent Variables Vision for Women’s Entrepreneurship

Women’s Entrepreneurial Leadership

Model 1 Model 2 Model 3

Control Variables Domestic growth 0.25 (3.84)*** 0.12 (1.98)* 0.10 (1.99)* Per capita income 0.40 (4.01)*** −.18 (−2.08)* −0.15 (−2.23)* Foreign direct investment 0.037 (.86) 0.067 (0.79) 0.065 (0.80) Collectivism 0.037 (0.60) −0.11 (−1.37) −0.11 (−1.38) Uncertainty avoidance 0.14 (1.57) −0.04 (−0.60) −0.03 (−0.58)

Main Effects Regulatory institutional

arrangements 0.21 (2.55)* 0.32 (3.58)*** 0.25 (3.80)***

Entrepreneurial cognitions 0.34 (5.60)*** 0.56 (11.10)*** 0.43 (8.73)*** Entrepreneurial norms 0.14 (2.58)* 0.15 (2.37)* 0.10 (2.29)*

Mediating Effect Vision for women’s

entrepreneurship 0.17 (2.98)***

Observations 381 381 381 Number of years 10 10 10 R2 0.42 0.59 0.62 Adjusted R2 0.39 0.60 0.51 ΔR2 0.03*** F-value 22.30*** 46.56*** 42.20*** F change 5.15** Max VIF 2.57 2.56 2.40

*p < .05, **p < .01, ***p < .001, †p < .1 (one-tailed test for hypotheses, and two-tailed test for control variables).

YOUSAFZAI, SAEED, AND MUFFATTO 597

indirect effect through VWE β = 0.34, p < .001; Sobel test = 4.84***), entrepreneurial norms (total effect β = 0.10, p < .05.; direct effect β = 0.07, p < .05.; indirect effect through VWE β = 0.02, p < .001; Sobel test = 5.04***), and entrepreneurial cognitions (total effect β = 0.32, p < .001; direct effect β = 0.31, p < .001; indirect effect β = 0.34, p < .001; Sobel test = 5.03***).

Discussion Drawing on the notion of the social

embeddedness of entrepreneurship and the insights of institutional theory, we proposed and validated a multi-level model of WEL using data collected in 92 countries through the GEM project. Our multi-level measures and analysis techniques provided an interac- tive answer to our research question: how do different institutional arrangements (regula- tory, normative and cognitive) interact to create a VWE that eventually drives WEL? Spe- cifically, we examined the mediating role of the VWE on the relationship between the regulatory, normative and cognitive pillars of institutional theory and WEL. Overall, the results of this study suggest two main conclu- sions. First, regulatory institutions, normative institutions, and entrepreneurial cognitions influence the VWE. Second, regulatory institu- tions, entrepreneurial cognitions and entrepre- neurial norms have a direct and an indirect effect (through VWE) on WEL. Note that although the direct effect of VWE on WEL is small relative to the effect of regulatory and cognitive dimensions, it plays an additional role in linking institutional dimensions to WEL.

Previous research has shown that the preva- lence of entrepreneurial activity greatly differs between countries (Freytag and Thurik 2007). This study addressed the role of the VWE to explain the country-level differences WEL. This study was conducted because the role of insti- tutional context on entrepreneurial activity seems to be under researched (Ahl 2006). Fur- thermore, recent conceptualizations of the VWE as a cultural value allow the application of a theoretically and empirically rigorous test of the relationship between institutional dimensions and WEL through a mediating effect of VWE. In general, our study indicated that WEL is

explained by the match between a VWE and institutional dimensions.

We found support for the direct effect of entrepreneurial norms, regulatory institutions and entrepreneurial cognitions on both WEL and VWE. We also found that VWE partially mediates the effect of institutional pillars on WEL. This suggests that these pillars of institu- tional theory may have different intrinsic prop- erties, a nuanced insight that has not yet been recognized in extant contingency theory. This is consistent with the structural contingency theory’s argument that favorable institutional dimensions determine the degree to which the VWE is supported. Although the women’s entrepreneurship literature widely reports that general normative support and a VWE are important factors in the emergence of WEL (Baughn, Chua, and Neupert 2006), we offer a new insight by arguing that the latter factor can be the route that makes the former a valuable resource in the emergence of WEL. These results also signal a ready supply of entrepre- neurs that see opportunities and believe they are capable of starting a business, and the regu- latory components in the environment will facilitate their efforts.2

We conducted a series of post hoc moderat- ing tests with other variables in this study but found no significant non-linear or moderated effect of a VWE between institutional pillars WEL. We evaluated the moderating view of the VWE and found significant interaction effects only between the VWE and entrepreneurial cognitions (β = −1.27, t = −2.36, p < .05) and regulatory institutions (β = −1.10, t = −4.93, p < .01). These findings are novel. They suggest that a VWE plays not only a mediation role but also an unexpected negative moderating role.

Both policymakers and scholars have con- siderable interest in measuring the levels of women’s entrepreneurship within and between nations. Our multidimensional country-level results underscore the variance between various institutional arrangements and WEL through the mediation of VWE. Our findings suggest that the rate of WEL in a country can be enhanced through supportive regulatory insti- tutions and, most importantly, improving the entrepreneurial cognitions for women’s entrepreneurship.

2We thank the anonymous reviewer for this insight.

JOURNAL OF SMALL BUSINESS MANAGEMENT598

Implications and Contributions This study contributes to women’s entrepre-

neurship literature in four main ways. First, the direct effect of country-level institutional dimensions sheds new light on the importance ascribed to the concept of the entrepreneurial environment in the emergence of WEL and the importance that the women’s entrepreneurship literature places on a broad understanding of normative contexts (Baughn, Chua, and Neupert 2006). However, the indirect, positive effects of institutional pillars also emphasize the need to embrace a more fine-grained notion of the entrepreneurial environment. Without this, it is unlikely that women’s entrepreneur- ship theory will unearth new insights into the role of the VWE in the emergence of WEL. Second, all entrepreneurship is contextually embedded in the social, cultural and political institutions (Bruton and Ahlstrom 2003). We found that where general entrepreneurial norms (entrepreneurship is respected and admired) and VWE (specific normative support for women’s entrepreneurship) are higher, the emergence of WEL is higher. Moreover, the VWE appears to be a more significant predictor of women’s entrepreneurial activity in a country than more general entrepreneurial norms (see Table 3, Model 3). This finding can be interpreted in the light of push and pull entry factors into entrepreneurship, because the impact of general entrepreneurial norms and the VWE are shaped by the context and choice set available to the nascent entrepreneur (Baughn, Chua, and Neupert 2006). Females will be pulled into self-employment by the VWE and normative support for entrepreneurship. However, this will be less relevant in the case of necessity-based entrepreneurship, that is, even a country where the VWE and normative institutions may inhibit women’s entry into entrepreneurship, economic constraints on employment will close off other options except self-employment (Baughn, Chua, and Neupert 2006).

Third, we clarify how and why the VWE matters in the emergence of WEL by showing its simultaneously mediating and moderating roles. We show that the VWE channels institu- tional dimensions into WEL. This new insight implies that by failing to consider the mediating role of the VWE, previous research may have assumed away the entrepreneurial environment demands in WEL. Therefore, it may have reached a premature and perhaps overly opti-

mistic view of the importance of the institu- tional environment in the emergence of WEL. More importantly, these findings suggest that institutional dimensions are necessary but not sufficient conditions for women’s entrepreneur- ship, and that their interaction with the VWE is the key driver of women’s entrepreneurship. We show that the VWE plays an important role in the emergence of WEL, by partially mediat- ing the effects of institutional dimensions on WEL. In other words, institutional dimensions may not be intrinsically valuable; their value may be realized through the VWE.

Fourth, given the complexity of the study context, the negative moderating effects of the VWE on entrepreneurial cognition and regula- tory institutions suggest that at high levels, they could supress the effect of institutional dimen- sions on women’s entrepreneurship. It appears that though some dimensions of the institu- tional theory may make a VWE necessary, the degree of the VWE might be tempered by the contextual complexity of the country. One could suspect positive moderating roles for the VWE. The new insight we offer is that there may be a threshold of the VWE beyond which institutional dimensions may have a detrimen- tal effect on women’s entrepreneurship. This is a trade-off that has not been uncovered in extant research.

Limitations and Future Research Opportunities

Some limitations need to be discussed in order to assess the generalizability of our results. Our analysis has a decent sample size for studies of this kind and we relied on data from two independent datasets and, therefore, there is no common method bias in our analy- sis. However, we have not considered the pos- sibility of a non-linear relationship between institutional arrangements and WEL, which can cause problems in the use of analytical tech- niques that depend on causality and on average values (Andriani and McKelvey 2009). Conse- quently, we do not consider how the cognitive and normative variance deviating from the average might affect individuals’ responses to institutional pressures. Future research should study these outliers in detail to develop further understanding of the topic. Second, our aim was to study women’s entrepreneurial activity at the national level. Accordingly, we consid- ered all variables at the national level; thus, our results should not be generalized to the indi-

YOUSAFZAI, SAEED, AND MUFFATTO 599

vidual level of entrepreneurship. Future research can study the effects of individual- level factors on women’s entrepreneurial decisions, for example, personality traits, entre- preneurial family background. Furthermore, we did not address the issue of how our proposed relationships will change over time across dif- ferent countries. Since the variables used in this study were collected systematically on a regular basis from 2002–2012, to achieve a more com- plete picture of women’s entrepreneurship in different countries, future research can possibly track the trajectories of different countries.

In this article, we have shown that WEL and a VWE are influenced by institutional condi- tions. A great deal remains to be done to under- stand the institutional effects on women’s entrepreneurial activity across countries, and thereby to understand better why certain indi- viduals switch from being employees to man- aging their own ventures. For example, further work could examine the effect of each of the components of our model. Preliminary analysis, not reported here, suggests interaction effects between regulation and entrepreneurial capac- ity and entrepreneurial opportunity. Repeating the analysis for start-ups in different industries or technology levels could also reveal different effects. While we have chosen to study entry, an analysis of the effect of institutional dimen- sions on exit rates could also be fruitful. Finally, further investigation of the extent to which women’s entrepreneurship is substitut- able under different institutional dimensions and regimes could explain why some countries with high regulation and relatively low rates of women’s entrepreneurship remain powerful economies.

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