Entrepreneurship, institutional variety and economic development

The <italic>contribution</italic> of entrepreneurship to economic growth varies across countries at different stages of economic development. The <italic>type</italic> of entrepreneurship also varies as countries develop: the ratio of necessity-based entrepreneurial firms (new entrepreneurial ventures born to escape unemployment) relative to opportunity-based entrepreneurial firms (new entrepreneurial ventures driven by business opportunities) changes as economies grow. Government has an interest in shaping the institutional environment in a way that supports dynamic entrepreneurial activity and contributes to economic growth. In this paper, we endogenize institutional variety into modern evolutionary models of diffusion; variety not only in organizational structures but also in investment financing of entrepreneurial firms. We discuss how our analysis updates understanding of modern evolutionary models of diffusion and we reflect on the practical implications for policy-makers to support entrepreneurial activities and stimulate economic growth.