Transferring Political Capabilities Into Formal Entrepreneurship: The Moderating Role of Market Development in Emerging Markets

Although emerging countries are important and primary sources of entrepreneurs, especially those driven by economic necessity, research on how unique factors influence entrepreneurial motivations and subsequent behaviors remains underexplored. Given the salient characteristics of political inertia in emerging economies, in this article, we investigate how political capabilities might influence formal entrepreneurship through entrepreneurial motivations (i.e., opportunity- and necessity-based motivation). We further examine how these impacts are shaped by market development since most emerging economies are experiencing extensive economic reforms. Using data from the global entrepreneurship monitor and additional archival sources, we find that an entrepreneur's political capabilities have an increasingly positive effect on opportunity-based entrepreneurial motivation at high levels of market development. Furthermore, opportunity-based motivation has a positive impact on formal entrepreneurship, which becomes stronger as market development improves. Overall, this study extends prior studies by contextualizing entrepreneurship in emerging economies.