The Effect of Economic Development and Political-Economic Institutions on the Probability of Starting Social Enterprises

This study explores the impact of institutional factors that facilitate the likelihood of starting social enterprises. Based on the GEM 2009 data set, we investigate the effect of economic development, government effectiveness, and economic freedom on early-stage social entrepreneurship. Using the method of logistic regression analysis, the study found a U-shaped relationship between economic development and probability of starting social enterprises. It also reveals that better-developed government policies, their successful implementation, and free economic conditions, enhance the chances of starting social enterprises in the most developed, innovation-driven economies, but have no effect in efficiency-driven economies. The results provide support for economic development theories of early-stage entrepreneurship. In addition, the interdependence and free market theories are supported in innovation-driven economies. Besides theoretical contributions, the research highlights the use of a new individual-level measure of early-stage social entrepreneurs, which enables controlling for other individual-level characteristics