Institutional economics and firm creation in the hospitality and tourism industry

Abstract

Despite its importance for the global hospitality and tourism industry, firm creation remains an under-researched activity, particularly in terms of differences across developing and developed economies. By examining the impact of institutional structure on firm creation across economies of varying development levels, this study aims to address gaps in the literature and inform theory, practice, and public policymaking. More specifically, formal institutions such as government size, protection of property rights, sound money, free trade, and regulation are examined to understand their impacts on firm creation. This study draws upon institutional theory and uses panel data (2001–2012) from the Global Entrepreneurship Monitor and Economic Freedom of the World index to test hypotheses with a sample of 37 developing and 28 developed countries. Analyses reveal differential effects of formal institutions on firm creation in developing and developed economies. Implications for future research, practice, and public policy are further discussed.