Using a multi-level modeling approach, the present study empirically examines how intellectual property rights, inflow of foreign direct investment and barriers to technological adoption affect the likelihood of individuals' entry into technology entrepreneurship in a sample of 20 emerging economies. The results suggest that regimes with strong intellectual property rights protection combined with high levels of foreign direct investment per capita decrease the likelihood of individuals' entry into technology entrepreneurship, whereas low barriers to technological adoption increase this likelihood. These findings contribute to understanding the influence that national institutions and foreign investment exercise on the entrepreneurial behavior of early-stage technology entrepreneurs in emerging economies, for which the extant literature shows mixed results.
The present study examines the influence of national level institutions and foreign direct investment on the propensity of individuals to enter into careers in technology entrepreneurship in emerging economies. This study contributes to the literature since the scope of its approach differs from the bulk of existing research, which does not theorize across levels of analysis (Hayton et al., 2002, Jack and Anderson, 2002 and Thornton, 1999), tends to assume mature market conditions (Reynolds et al., 2005), and attempts to predict entry into generalized entrepreneurship rather than specialized forms such as techno-entrepreneurship (Phan, 2004, Shane and Venkataraman, 2000 and Xia and Tang, 2011). These limitations of previous research leave an important gap that the present study seeks to fill.
First, the policy-oriented literature must recognize the importance of contextual influences on entrepreneurship in order to avoid inappropriate policy transfer (Busenitz et al., 2003). For instance, policies that stimulate economic growth in developed countries may fail to do so in emerging economies because institutions in the latter are less developed and still evolving. Studies that lump together countries representing both mature and emerging economies may not be able to discern potential disparities concerning the effects of institutions on individuals' entrepreneurial behavior according to stage of socioeconomic development.
Second, instead of looking to general entrepreneurship (Shane, 2009), this study examines an entrepreneur's propensity to create potentially new and unfamiliar technological products or services. Since technological improvements power the transition from the manufacturing-driven stage to the innovation-driven stage of economic development (Wennekers, Wennekers, Thurik, & Reynolds, 2005), a closer look at the factors influencing technology entrepreneurship is of particular importance in the context of emerging economies.
Using employment choice theory as a guiding theoretical framework, previous literature views national institutions as incentive structures that signal the availability of resources as well as the degree of ease with which technology entrepreneurs can acquire, mobilize, and blend resources to maximize economic rents, therefore affecting the choice of technology entrepreneurship as a career (Douglas & Shepherd, 2002). Policies concerning intellectual property rights (IPR), foreign direct investment (FDI), and barriers to technology adoption (BTA) are particularly controversial in that their effects may differ considerably between developed and emerging economy contexts. For example, some developing countries may want to attract FDI but avoid strong IPR regimes, yet policymakers often tie these policy choices together in trade agreements. Unfortunately, high BTA that often characterize emerging economies are already likely to decrease the potential for beneficial knowledge spillovers from FDI and strong IPR may further impede these spillovers. Knowledge spillovers are among the most important theoretical drivers of technology entrepreneurship, making them important considerations for policymakers as they formulate and negotiate trade agreements. In summary, this study's guiding theoretical question is the following: how do national level factors affect technology entrepreneurship in emerging economies?
In order to answer this question, this study's theoretical framework and empirical design entail two distinct levels – individual-level variables (level-1) and country-level variables (level-2) – such that multi-level estimation techniques are appropriate to test the proposed hypotheses concerning drivers and deterrents of entrepreneurs' entry into technology entrepreneurship. The dataset combines measures of individual-level technology entrepreneurship collected from the Global Entrepreneurship Monitor (GEM) survey on 20 emerging economies for 2002–2008 with measures of country-level institutions from the Index of Economic Freedom (IEF), World Bank Group, and the work of Cassou and Xavier de Oliveira (2011). The results suggest that FDI and BTA both exercise negative effects on the likelihood of entrepreneurs' (hereafter also referred to as individuals) propensity to engage in technology entrepreneurship. The interaction between IPR and FDI also diminishes this likelihood. Thus, the present study makes an important contribution to a literature that has thus far provided equivocal findings about the role of these institutional factors in emerging economies.
This paper structures the remaining text as follows. Section 2 develops hypotheses about the main effects of IPR protection regimes, FDI, and BTA on technology entrepreneurship as well as on the interactions between IPR and FDI and between IPR and BTA. Section 3 introduces the study's data sources, measures and multi-level modeling methods. Section 4 presents the results of the hypothesis tests using a sample of potential technology entrepreneurs in 20 emerging economies. Section 5 considers the study's implications, limitations, and future research potential, and concludes the paper.
This study employs hierarchical modeling methods and a four-step testing strategy based on random-effect logistic regressions to estimate the influence of country-level factors, namely IPR, FDI, and BTA on the likelihood of individuals' entry into technology entrepreneurship in emerging economies, using data from 20 representative nations during the 2002–2008 period. The statistical analysis indicates that strong IPR protection regimes combined with high levels of FDI per capita negatively affect the likelihood of individual's entry into technology entrepreneurship, while low BTA increase this likelihood. Thus, the present study contributes to the literature on technology entrepreneurship in emerging economies, which up until now provides mixed results for these relationships.
