Perceived institutional support and small venture performance: The mediating role of entrepreneurial persistence:

TL;DR: In this paper, the authors examine the entrepreneurial persistence of opportunity-motivated entrepreneurs in Ghana and develop a theoretical model focusing on the relationships among perceived in Ghanaians, focusing on relationships between perceived in...

Abstract: This article examines the entrepreneurial persistence of opportunity-motivated entrepreneurs in Ghana. Specifically, it develops a theoretical model focusing on the relationships among perceived in...

Summary

Introduction

• Such environments offer limited alternate employment opportunities and lack institutions supporting entrepreneurship such as those available in developed countries whilst a dearth of support agencies limits business assistance and industry-related information (Ladzani and Van Vuuren, 2002; Mamman, Bawole, Agbebi, and Alhassan, 2019).
• Second, the authors find entrepreneurial networking to moderate the PIS–EP relationship.

Theoretical framework and hypotheses

• As depicted in Figure 1, the authors examine the moderated–mediated relationship between PIS and SVP; drawing from analyses of institutional theory to argue that OMEs who perceive higher institutional support are more likely to consider EP as conducive environments that reinforce the benefits of persistence to exploit the opportunity.
• While the focus on specific external factors and entrepreneurial agency varies across different conceptualisations (Brown and Mason, 2017; Davidsson et al., 2018), a critical component of the external environment— institutions— undeniably influences entrepreneurial activities (Boettke and Coyne, 2009).
• These institutions could be formal institutions such as those representing a legal framework or informal institutions such as those characterised by a code of conduct (North, 1990).
• OMEs need to actively engage in venture activities to seize the opportunity.
• While relying on social ties has certain drawbacks, especially if the entrepreneur’s network is dominated by social ties (Khayesi, George, and Antonakis, 2014), these ties also provide valuable human resources at little or no cost and assist in pursuing venture activities.

Sample and data collection

• The authors randomly selected 1,500 OMEs from the Ghana Business Directory database (Acquaah, 2007).
• The authors selected firms aged up to 10 years because they are interested in capturing various developmental stages (Cardon and Kirk, 2015), and as such they label the firms in their sample as “small ventures” and (4) ventures must have employed fewer than 250 employees as of January 2017.
• The authors collected data in two waves with approximately four months between the end of their first survey wave (T1) and the start of the second survey wave (T2).
• Using the same approach as the first survey, a hand-delivered questionnaire was provided to the finance managers of the 509 firms to capture performance measures.
• The authors assessed non-response bias by comparing early and late respondents.

Measures

• All measures were adopted from previous studies.
• The authors explored the business network construct with three items taken from previous studies (Lau and Bruton, 2011; Yiu, Lau, and Bruton, 2007).
• The authors focused on market performance and profitability measures as the main dependent variables taken from previous studies (Menguc and Auh, 2008; Sheng, Zhou, and Li, 2011).
• The authors included firm age, size, industry, prior business growth and OME age, gender, education and entrepreneurial experience as control variables.
• In their second test for common method variance, the authors followed Lindell and Whitney’s (2001) approach and used a marker variable to tease out potential common method variance.

Results

• The authors present the descriptive statistics and correlations of all key variables in Table 2.
• The authors present the results of the regression analyses in Table 3.
• Second, the mediating variable must significantly relate to the dependent variable(s).
• Together these results provide support for Hypothesis 1.
• The results also show that when both social and business network ties are included in Model 3, the influence of PIS on EP is still significant (β = .24, p < .01).

Robustness analyses

• The authors ran two additional tests to establish the robustness of their regression results.
• First, to gain additional insight into how the results differ in terms of social and business networks, the authors performed a PROCESS analysis (Hayes, 2013) to establish the mediation influence when the moderating effects of social and business networks are added.
• This suggests that the indirect effects are significant (p < .01) at low, mean and high values of the moderator.
• Besides, the results in Table 4 show that the indirect effect of PIS on market performance via EP grows from 1.21 for ventures with low social networks to 1.91 for ventures with high social networks.
• Insert Table 5 here Second, the authors used employment growth data (2014–2016) gathered from finance managers of the firms in their sample to retest their hypotheses (N = 157).

Discussion and implications

• The authors build on prior research which related EP to desire to overcome adversity (Holland and Shepherd, 2013) and personal and environmental constraints (DeTienne et al., 2008; Holland and Garrett, 2015) to examine how PIS influences EP and consequently affects SVP.
• In particular, the authors relate EP to the agency which OMEs display to navigate the challenges of difficult conditions and position their venture for success.
• The authors also examine the moderating effects of social and business networks on the PIS–EP relationship.
• The authors findings indicate a positive relationship between PIS and EP.
• This suggests that when OMEs in developing countries perceive institutions as supportive, this encourages EP, and it in turn positively impacts SVP.

Theoretical implications

• The authors findings make several contributions to the entrepreneurship literature, specifically to the literature examining the influence of institutions on entrepreneurial activities as well as the literature on EP.
• First, their study examines the mediating effects of EP on the relationship between PIS and venture performance.
• While there has been some analysis of the impact of external factors, such as microeconomic conditions, economic freedom and physical infrastructure on nascent entrepreneurial activities (Bennett, 2019; McMullen et al., 2008), relatively less attention has been afforded to examining the influence of PIS on behaviours of OMEs, such as EP.
• In particular, OMEs tend to display higher EP when they perceive higher institutional support and actively utilise social and business networks.
• The Ghanaian context is significantly different from developed countries in terms of financial, economic and infrastructure development (Fainshmidt et al., 2018; Julian and OforiDankwa, 2013).

Practical implications

• This article offers valuable insights for OMEs.
• First, their findings suggest that entrepreneurial agency plays an important role in influencing SVP.
• Those OMEs who persist in conditions they perceive as supportive are likely to attain better performance.
• Such OMEs may access resources and have privileged connections that can help to navigate challenging environments.
• Third, while objective data about institutional support may be useful, entrepreneurial behaviours are more likely influenced by the subjective beliefs of OMEs regarding the institutional environment particularly after they gain experience in that context.

Limitations and future research

• EP and SVP, the authors do not know to what extent this is affected by OME growth aspiration.
• Relatedly, prior research has suggested that entrepreneurial networks condition opportunity recognition and realisation (Jack and Anderson, 2002) which could influence EP.

Conclusion

• This article extends prior literature by examining the influence of perceived institutional support (PIS) on small venture performance (SVP) mediated by entrepreneurial persistence (EP).
• The authors evidence highlight the critical role EP plays in mediating the relationship between PIS and SVP illustrating that perceptions of OMEs affect their behaviours, which in turn influences venture outcomes.
• Furthermore, the authors demonstrate that the relationship between PIS and EP is moderated by the social and business networks developed by OMEs; this suggests that social and business ties provide valuable resources and support needed to persist with entrepreneurial actions.
• The authors hope that the insights in this article motivate researchers to analyse the influence of an entrepreneur’s perception of the prevailing context upon their cognition and behaviour.

Figures

Figure 1. Mediating–Moderating Model of Perceived Institutional Support and Small Venture Performance

Table 2. Descriptive Statistics and Correlations

Table 1. Common Method Bias Nested Models and Goodness-of-Fit Statistics

Table 5: Regression Results of Employment Growth (N = 157)

Table 4. Conditional Indirect Effect(s) of PIS on Market Performance at Values of Social Networking1

Figure 3. Interaction Effect of PIS with Business Network on EP

Figure 2. Interaction Effect of PIS with Social Network on EP

Table 3: Regression Results of Small Venture Performance (N = 373)

Full text

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1
Perceived Institutional Support and Small Venture Performance: The Mediating Role of
Entrepreneurial Persistence
Abstract
This article examines the entrepreneurial persistence of opportunity-motivated entrepreneurs in
Ghana. Specifically, it develops a theoretical model focusing on the relationships among
perceived institutional support, entrepreneurial persistence and small venture performance,
including how entrepreneurial networks condition the relationship between institutional support
and entrepreneurial persistence. Using time-lagged data from 373 opportunity-motivated
entrepreneurs leading small ventures in Ghana, we find broad support for our hypotheses. The
insights from our study provide an integrative understanding of the relationships among
perceived institutional support, entrepreneurial persistence and venture performance in an
adverse environment. Theoretical and practical implications are discussed.
Keywords: entrepreneurial persistence, networks, SMEs, performance
Introduction
Entrepreneurial persistence (EP), described as “behaviour that involves goal-directed energy
(Seo, Barrett, and Bartunek, 2004; Wu, Matthews, and Dagher, 2007), where the goal involved is
success of the entrepreneurial venture” (Cardon and Kirk, 2015: 1030), is subject to increasing
interest within the entrepreneurship literature. This research stream has emphasised that EP
enables entrepreneurs to overcome obstacles they encounter in the entrepreneurial process and
move their ventures forward (Davidsson and Gordon, 2016; Meek and Williams, 2018). Scholars
have examined the influence of various individual, firm and environmental factors on EP
(Adomako, Danso, Uddin, and Damoah, 2016; Lomberg, Thiel, and Steffens, 2019) and
highlighted its positive impact on venture growth (Baum and Locke, 2004) and survival
(Acheampong, 2018; DeTienne, Shepherd, and Castro, 2008). For example, utilising insight
from the literature on risk and decision making (Kahneman and Tversky, 1979; March and
Shapira, 1987), DeTienne and colleagues (2008) find entrepreneurs of underperforming firms are
more likely to persist in a high-munificence environment than in a low one. Similarly, Holland
and Shepherd (2013) find entrepreneurs are less likely to persist in a context of high adversity.
Utilising an expectancy theory framework, Holland and Garrett (2015) examine entrepreneur
decisions to persist with their ventures; ths suggests they are more likely to persist when they
perceive a high likelihood of obtaining positive financial and non-financial outcomes. Simply
put, the extant literature implies that a favourable external environment provides fecund

2
opportunities to succeed, and this increases the tendencies of entrepreneurs to persist with their
ventures.
While existing evidence broadly suggests that supportive institutional environments
enable entrepreneurial activities (Aidis, Estrin, and Mickiewicz, 2008; Hunt, 2015) and improve
firm performance (Baum and Oliver, 1991; Li and Zhang, 2007), it provides limited insights on
how these factors influence opportunity-motivated entrepreneurs (OMEs) operating in
historically adverse conditions. Compared to necessity-motivated entrepreneurs (NMEs), OMEs
may have other opportunities available and might find these more attractive than persisting with
their ventures in adverse conditions. Indeed, certain external factors affect OMEs and NMEs
differentially (McMullen, Bagby, and Palich, 2008). As OMEs play a vital role in developing and
growing the economy, it is crucial to gain a better understanding of how their perception of the
institutional environment influences their EP, and consequently, venture outcomes.
Although perceived institutional support (PIS) could trigger OMEs to act and persist with
entrepreneurial activities, this is more likely to occur when entrepreneurs are embedded in
networks of relationships. These networks not only provide specific resources but also establish
reciprocal dependency relationships and support (Hite, 2005; Sullivan and Ford, 2014).
However, such networks shift from calculative to affective over time (Jack, Moult, Anderson and
Dodd, 2010) with varying impacts on firm outcomes (Acheampong, Narteh, and Rand, 2017).
We therefore, argue that it is pertinent to examine the moderating effects of both social and
business networks on the relationship between PIS and EP.
We test our model using a sample of 373 small ventures in different stages of
development located in Ghana, a developing African country. The institutional environment for
entrepreneurs in less developed countries differs significantly from that of more developed
countries (Fainshmidt, Judge, Aguilera, and Smith, 2018; Lafuente, Szerb, and Acs, 2016). Such
environments offer limited alternate employment opportunities and lack institutions supporting
entrepreneurship such as those available in developed countries whilst a dearth of support
agencies limits business assistance and industry-related information (Ladzani and Van Vuuren,
2002; Mamman, Bawole, Agbebi, and Alhassan, 2019). For instance, Ghana is historically a
factor-driven economy with high unemployment over the years (approximately 7%)
1
. Not
1
https://www.theglobaleconomy.com/Ghana/Unemployment_rate/, last accessed on 4 June, 2019

3
surprisingly, Ghanaians are actively involved in entrepreneurial activities despite the adverse
conditions with many operating as NMEs
2
.
This article makes three contributions to the entrepreneurship literature. First, we
examine relationships which have so far, received limited attention; giving a clearer perspective
on the antecedents and outcomes of EP and generating insights into the mediating effect of EP on
the relationship between PIS and small venture performance (SVP). Second, we find
entrepreneurial networking to moderate the PIS–EP relationship. The third contribution relates to
our study sample—OMEs in adverse environments acknowledging that context is vitally
important in entrepreneurship theory building (Zahra, 2007). Entrepreneurship in less developed
economies, particularly those from the continent of Africa, remains under-researched. The
overwhelming focus on developed countries (e.g., US, UK, Canada) calls into question the
generalisability of entrepreneurship findings and theories. We take a step toward addressing this
issue.
Our article proceeds as follows. In the next section, we develop a theoretical model
focusing on the relationships among PIS, EP and SVP, including the moderating effects of
entrepreneurial networks. A section describing the research methodology and findings follows.
Finally, we discuss the theoretical and practical implications, limitations, and future research
opportunities.
Theoretical framework and hypotheses
As depicted in Figure 1, we examine the moderated–mediated relationship between PIS and
SVP; drawing from analyses of institutional theory to argue that OMEs who perceive higher
institutional support are more likely to consider EP as conducive environments that reinforce the
benefits of persistence to exploit the opportunity. PIS affects OME cognition and behaviour
(Aragon-Mendoza, del Val, and Roig-Dobón, 2016; Lim, Morse, Mitchell, and Seawright, 2010),
which improves SVP. Specifically, EP mediates the relationship between PIS and SVP, where
greater PIS leads to higher EP that positively affects SVP. Building on the entrepreneurial
networking literature (for reviews see Hoang and Antoncic, 2003; Hoang and Yi, 2015), we
argue that social and business networks positively moderate the relationship between PIS and EP
making this relationship stronger for OMEs with more robust networks.
2
https://www.gemconsortium.org/economy-profiles/ghana, last accessed on 12 April 2019

4
Insert Figure 1 here
Institutions, cognition and entrepreneurial persistence
The extant entrepreneurship literature emphasises the influence of local external environments
on entrepreneurial activities highlighting region-specific factors and external enablers. Studies
focusing on region-specific factors cover a wide array of topics such as clusters (Martin and
Sunley, 2011), national innovation systems (Lundvall, 2010) and entrepreneurial ecosystems
(Audretsch and Belitski, 2017). In general, these studies investigate how the structure and
workings of specific geographic regions provide a fertile environment for entrepreneurial
activities. The influence of external enablers/disablers on entrepreneurial activities (Bennett,
2019; Davidsson, 2015) has also been noted. In particular, Davidsson, Recker, and von Briel
(2018) elucidate how the impact of external enablers (e.g., crowdfunding, country-specific
regulation) varies across industry sectors and geographic regions. While the focus on specific
external factors and entrepreneurial agency varies across different conceptualisations (Brown and
Mason, 2017; Davidsson et al., 2018), a critical component of the external environment—
institutions— undeniably influences entrepreneurial activities (Boettke and Coyne, 2009).
Indeed, a multitude of studies show institutions influence firm strategies (Meyer, Estrin,
Bhaumik, and Peng, 2009; Oliver, 1991) and firm performance (Baum and Oliver, 1991; Powell,
1988).
Although there is no single, consensual definition of institutions (Scott, 1995), it is
generally accepted that institutions frame the “rules of the game in a society” (North, 1990: 3).
Well-developed institutions provide a stable environment for firms to operate in, enabling them
to access necessary resources and efficiently conduct their business activities. These institutions
could be formal institutions such as those representing a legal framework or informal institutions
such as those characterised by a code of conduct (North, 1990). The prevailing institutional
environment enables or constrains entrepreneurial activities in a specific location (Boettke and
Coyne, 2009; Minniti, 2008). Formal institutions such as state laws and the capital market can
reduce uncertainty related to business creation and operation enabling firms to access critical
financial resources. Similarly, informal institutions may establish norms and a code of conduct
between a firm and its stakeholders (e.g., suppliers, distributors). Thus, well-established

Frequently asked questions

Q1. What are the contributions in this paper?

This article examines the entrepreneurial persistence of opportunity-motivated entrepreneurs in Ghana. The insights from their study provide an integrative understanding of the relationships among perceived institutional support, entrepreneurial persistence and venture performance in an adverse environment. Theoretical and practical implications are discussed. 

Q2. What are the future works in this paper?

Despite the unique provided within this study, there are limitations which could be addressed through future research. By collecting information on growth aspiration, risk propensity and other related variables ( Ma, Mattingly, Kushev, Ahuja, and Manikas, 2019 ), future research could provide a deeper understanding of the dynamics among PIS, EP and SVP. Future studies could enhance their findings by utilising objective performance measures where possible. Future research can extend the findings of their study by conducting a longitudinal analysis of early-stage ventures and contrasting those findings with a longitudinal study of late-stage ventures. 

Q3. What is the effect of external factors on entrepreneurial activities?

For instance, prior research indicates that gross domestic product negatively affects entrepreneurial activities of both OMEs and NMEs, whereas labour freedom positively affects the entrepreneurial activities of OMEs and NMEs (McMullen et al., 2008). 

Q4. What is the effect of a supportive institutional environment on OMEs?

A supportive institutional context provides a fertile context to engage in opportunity exploitation, increasing OME estimates of achieving the desired outcome; so again, they are more likely to persist. 

Q5. What is the significance of the factor loadings for each of the constructs?

factor loadings for each of their multi-item constructs exceeded the suggested threshold value of .40 (Anderson and Gerbing, 1988), indicating convergent validity. 

Q6. What is the main reason why OMEs are likely to persist?

the effective support provided by these ties is likely to encourage OMEs to continue to persist as this can boost morale during periods of self-doubt (Newman, Mole, Ucbasaran, Subramanian, and Lockett, 2018; Zheng, Ahsan, and DeNoble, 2020). 

Q7. What is the effect of the previous research on EP?

prior research has suggested that entrepreneurial networks condition opportunity recognition and realisation (Jack and Anderson, 2002) which could influence EP. 

Q8. What is the role of networks in promoting entrepreneurial activity?

Networks provide access to critical resources such as financial, informational and human resources and other non-economic benefits (e.g., mentoring) which enable entrepreneurs to pursue entrepreneurial activities (Ahsan, Zheng, DeNoble, and Musteen, 2018; St-Jean and Tremblay, 2020). 

Q9. How did the authors assess the variance of the OME sample?

Common method variance, validity and reliability assessmentThe authors utilised several approaches to attenuate potential common method variance in ourdata. 

Q10. What is the effect of the entrepreneur beliefs on OMEs?

Holland and Garret (2015) state that entrepreneur beliefs in their ability to take advantage of opportunities and gather the necessary resources required to pursue entrepreneurial activities, as well as their confidence in achieving the desired financial and nonfinancial benefits, influence EP. 

Q11. What is the effect of intrinsic interest in entrepreneurship on the level of persistence of an entrepreneur?

the authors found that an entrepreneur’s intrinsic interest in entrepreneurship significantly affects their level of persistence (r = .30, p < .01) but does not directly influence venture performance (r = .01, ns). 

Q12. What is the effect of social and business networks on EP?

the authors demonstrate that the relationship between PIS and EP is moderated by the social and business networks developed by OMEs; this suggests that social and business ties provide valuable resources and support needed to persist with entrepreneurial actions. 

Q13. What is the relationship between social networks and entrepreneurial persistence?

H2: Social networks of OMEs moderate the relationship between perceived institutional support and entrepreneurial persistence, such that the relationship will be stronger for OMEs with strong social network ties than OMEs with weak social network ties. 

Q14. What is the effect of emotional support on the development of a venture?

Klyver, Honig, and Steffens (2018) find that emotional support is more useful when it is received at earlier stages of venture development than later during the venture emergence process.