Small Business Economics

, Volume 53, Issue 3, pp 709–738 | Cite as

Capital is not enough: opportunity entrepreneurship and formal institutions

  • Christopher J. BoudreauxEmail author
  • Boris Nikolaev


We examine how economic institutions, measured by the Economic Freedom of the World (EFW) index, affect the relationship between capital—human, social, and financial—and opportunity-motivated entrepreneurship (OME). To do this, we develop a multi-level model that connects theories of human and social capital at the micro-level to institutional theories at the macro-level. Using data from the Global Entrepreneurship Monitor (GEM), we then test the predictions of our model and find evidence that economic institutions play a crucial role in the relationship between these three distinct types of capital and OME. Our results are somewhat counter-intuitive—as the quality of the institutional environment improves, human and financial capitals become less important determinants of entrepreneurship while the relationship between social capital and entrepreneurship substantially strengthens.


Economic freedom Entrepreneurship Financial capital Human capital Institutions Social capital 



Opportunity-motivated entrepreneurship


Global Entrepreneurship Monitor


Total early-stage entrepreneurial activity


Economic freedom (Fraser Institute)

Human capital

College education

Financial capital

Household income

Social capital

Ties with other entrepreneurs

JEL classification

E22 J24 L14 L26 M13 


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Authors and Affiliations

  1. 1.Department of EconomicsFlorida Atlantic UniversityBoca RatonUSA
  2. 2.Department of EntrepreneurshipBaylor UniversityWacoUSA

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