Dynamic Analysis of the Adoption and Diffusion of the Entrepreneur's Behavior: An Institutional Approach

Abstract

A high level of entrepreneurship is a positive indicator of a country's potential for economic growth. However, some countries are more entrepreneurial than others, and this trend is often difficult to change. This paper addresses why the entrepreneur-to-population ratio remains so consistent within a country over time. The analysis is based on the Spanish case, which is one of the countries with the lowest entrepreneurship rates worldwide, despite the regulative efforts of governments over the past 20 years. Drawing on Bass's adoption-diffusion theory of innovations, while also considering the regulative, normative, and cultural-cognitive institutional dimensions affecting the entrepreneurs' behavior, we have designed a model that reproduces the flow of entrepreneurs through an entrepreneurial process consisting of three stages: potential entrepreneurs, early-stage entrepreneurs, and established entrepreneurs. Our main findings suggest that the number of entrepreneurs goes after a dynamic of growth and stagnation throughout the process. The Adoption and Diffusion of Entrepreneurs' Behavior (ADEB) model proposed herein explains both the time-limited effect of regulative incentives on the diffusion of entrepreneurs through the entrepreneurial process, as well as the long-term effect of normative and cultural-cognitive institutional dimensions. The theoretical discussion derived from this dynamic analysis provides relevant implications for academics, policy makers, and entrepreneurs.