The Influence of institutional arrangements on the rate and type of entrepreneurial activity in South Africa

Muzamhindo, Angeline
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ABSTRACT Institutional theory is a popular theoretical framework for analysing entrepreneurship research. Formal and informal rules, information and societal values shape the incentive structure in a society to engage in entrepreneurial activities. Given the importance of entrepreneurship in driving economic growth, it should be promoted and nurtured. This study reviewed the existing literature that utilizes institutional theory to understand entrepreneurship and applied the findings to explain the South African context. The research report sought empirical validation of a multi-dimensional instrument for measuring country institutional profiles influence on the rate and type of entrepreneurial activity in South Africa through a sample of 163 small, micro and medium enterprises in the Gauteng Province. Entrepreneurship and SMME‟s in particular, are hailed as integral instruments of economic and social development; therefore, it is imperative for scholars and legislators to understand the apparently countervailing forces of institutions on entrepreneurial activity. The 1994 political transformation saw the establishment of processes and programmes within government structures to provide comprehensive support to small business. However, the country entrepreneurship rankings are low in most regional and global studies. The research adopted a quantitative approach and results obtained suggested high reliability and internal consistency of the research instrument. The research found that the regulatory, cognitive and conducive environments had significant influence on entrepreneurial activity but found no evidence to prove that the normative environment had significant influence on business formation. The recommendations point to the need for government led public-private partnerships among all the organisations supporting small, micro and medium enterprises establishment and growth.
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New business enterprises, Small business, Entrepreneurship -- South Africa.