Innovation affecting growth aspirations of early stage entrepreneurs: culture and economic freedom matter

Earlier research confirms the positive effect of innovation in shaping growth ambitions of entrepreneurs. The aim of this paper is to investigate whether the effect of innovation on growth ambitions of entrepreneurs is contingent on the role of institutions, namely, culture and economic freedom. In other words, the authors’ objective is to provide an institutionally contingent understanding of the role of innovation in shaping growth ambitions of early-stage entrepreneurs.

The authors applied hierarchical linear modeling technique on the data of 100,566 early-stage entrepreneurs in 109 countries that participated in annual surveys of Global Entrepreneurship Monitor.

The authors find that the effect of innovation on shaping growth ambitions of early stage entrepreneurs is contingent on the role of culture such that, in secular cultures, innovation benefits growth ambitions more than traditional cultures. Further, the authors found that the effect of innovation on growth expectations is dependent on the level of economic freedom in the country in which the firms operate so that in the countries with higher level of economic freedom, early-stage entrepreneurs expect more growth out of their innovation as compared to their counterparts in the depressed economies.

The results contribute to our understanding of entrepreneurial growth aspirations as a result of the interplay of entrepreneur–firm–environment nexus.