Shadow Economy as Moderator of National-Level Institutions : A Multi-Level Analysis of Technology Entrepreneurship in Developed and Developing Countries

This paper examines the moderating influence of the size of a country’s shadow economy on the effects of national institutions on the likelihood that individuals will enter into technology entrepreneurship. Using multi-level study of 44 countries – 20 developing and 24 developed – and 25,957 entrepreneurs we find that a relatively larger shadow economy acts as a potent moderator of the effects of national institutions (intellectual property rights, foreign direct investment, and venture capital) on technology entrepreneurship. Moreover, we identify that these moderation effects are different in developed versus developing economies. Thus, we contribute to the literature concerning the effects of national institutions on entrepreneurship, by examining how the shadow economy affects developed and developing of economies differently. The implications of our study may be relevant to entrepreneurship, policy developers, and entrepreneurship scholars