The Institutional-Ideological Matrix:
Entrepreneurship is often celebrated as the engine of economic growth and innovation. But not all entrepreneurship is created equal, and what drives people to start businesses varies widely across the globe. My recent study explores a fascinating new framework I call the "Institutional-Ideological Matrix." This concept sheds light on how the freedom to act and the underlying ideologies in a society shape whether people pursue opportunity-driven or necessity-driven entrepreneurship. You can read my latest working paper here.
Opportunity vs. Necessity Entrepreneurship
Opportunity-driven entrepreneurs are motivated by the prospect of growth and innovation, spotting gaps in the market they can fill with new ideas. Necessity-driven entrepreneurs, on the other hand, often start businesses out of a lack of other options, creating ventures for survival rather than innovation. These two types of entrepreneurship play very different roles in an economy.
In developed countries, we tend to see more opportunity-driven entrepreneurship, which contributes significantly to economic growth and job creation. In developing nations, necessity-driven ventures are more common but may not offer the same economic impact.
Introducing the Institutional-Ideological Matrix
To understand these differences, I developed the Institutional-Ideological Matrix, which integrates two major influences on entrepreneurship:
Freedoms – Economic, political, and legal freedoms determine the "rules of the game" in each country.
Ideologies – Societal beliefs about authority and well-being shape how people view their role in the economy and influence their decisions to start a business.
By analyzing data from 107 countries, my study found that these elements interact in complex ways to impact the types of entrepreneurship that thrive.
The Role of Freedoms
Economic freedom allows individuals to operate businesses with minimal government intervention. Political freedom enables participation in democratic processes and free expression, while legal freedom ensures fair treatment under the law. Together, these freedoms create an environment where people feel empowered to pursue entrepreneurial ventures—at least in theory.
Ideologies: Authority and Well-Being
Cultural beliefs are equally powerful. Authority ideologies range from traditional (upholding religious or hierarchical values) to secular (emphasizing individualism and logic). Well-being ideologies vary from survival-focused (prioritizing material security) to self-expression-focused (valuing creativity and fulfillment).
When these ideologies combine with freedoms, they form the Institutional-Ideological Matrix, which profoundly shapes whether opportunity-driven or necessity-driven entrepreneurship prevails.
Four Contexts of the Institutional-Ideological Matrix
The interaction between freedoms and ideologies can be visualized in four distinct contexts:
High Authority, High Well-Being (Secular + Self-Expression): Here, the positive effects of freedom on entrepreneurship are moderate. People have the resources to innovate, but traditional values may temper full creative expression.
Low Authority, High Well-Being (Traditional + Self-Expression): In this context, high well-being encourages innovation, while traditional authority may bring a balanced, cautious approach to risk.
Low Authority, Low Well-Being (Traditional + Survival): Here, necessity entrepreneurship often dominates, as individuals focus on survival and are less inclined to take risks.
High Authority, Low Well-Being (Secular + Survival): In this setting, economic freedom strongly encourages opportunity entrepreneurship, but survival needs limit the potential for higher-level creativity.
Key Findings: Freedom’s Varied Impact
My study shows that while economic, political, and legal freedoms generally support opportunity-driven entrepreneurship, their effects vary depending on the ideological context. For example:
In high well-being societies, increased freedoms sometimes fail to boost opportunity-driven entrepreneurship as strongly as expected. When survival is less of a concern, other factors like cultural expectations may influence entrepreneurial motivations more deeply.
In low well-being settings, particularly with high authority, freedoms align more predictably with increased opportunity entrepreneurship, indicating that emerging economies may benefit more directly from institutional freedom.
Why the Institutional-Ideological Matrix Matters
The Institutional-Ideological Matrix highlights why a one-size-fits-all approach to fostering entrepreneurship may not work. Policymakers aiming to promote entrepreneurship should consider the unique interplay of freedoms and ideologies in their societies. Tailoring strategies to fit each country’s specific context can create more impactful entrepreneurship programs that truly foster growth and innovation.
Final Thoughts
The Institutional-Ideological Matrix offers a more nuanced understanding of entrepreneurship across cultural and institutional settings. By recognizing the complex interactions between freedoms and ideologies, we can better understand why some societies thrive with opportunity-driven ventures while others see a rise in necessity-driven businesses. This insight not only advances entrepreneurship theory but also provides a framework for policymakers to cultivate high-quality entrepreneurship worldwide.
