The present thesis attempts to capture the institutional environment of Indian states through various institutional variables and regional features. Finally, the index of institutional quality provides an overview of changes in the institutional environment in the states of India.
Introduction 1
- Background of the Study
- Importance of the Study of Institutional Environment and Entrepreneurship in
- Statement of the Problem
- Objectives of the Study
- Research Questions
- Data Sources and Methodology
- Layout of the Dissertation
These are few examples that support the importance of the study of the institutional environment in the context of entrepreneurship in India. To have an overview of the institutional environmental differences across the states in India in relation to entrepreneurship.
Review of Literature 11
Entrepreneurship: Definitions and Importance
- Definitions
- Importance of the Entrepreneurship
Entrepreneurship in the Empirical Context
- Measuring Entrepreneurship
- MSMEs and Its Importance
- MSMEs in India
- Factories in India
Institutions: Meaning and Significance
- Meaning of Institutions
- Significance of Institutions
Role of Institutions in the Entrepreneurship
Institutional Variables and Regional Traits
- Opportunity-Related Institutional Variables
- Security-Related Institutional Variables
- Efficiency-Related Institutional Variables
- Institutional Variables Related to the Social and Political Environment.41
Role of Business Incubation Centres
- Business Incubation in India
Case of India
Studies in Indian Context
On the other hand, the structure of institutions is determined by the interactions of individual agents. The accumulation of human capital in the form of education is an important aspect of entrepreneurship supply.
Summing up
Debroy and Bhandari (2014) in their studies developed the index of economic freedom for states of India based on 'Economic Freedom of the World (EFW)' methodology. Several institutional variables/regional characteristics advocated as supporting institutions for entrepreneurship are: larger market size, lower size of government and openness of the economy; higher level of education and credit ratio as well as better availability of the information; a secure property right and rule of law with a strong and independent judiciary as well as political stability with equal income distribution and better social institutions. Considering the paucity of studies on institutional environment differences across the various Indian states and their role in determining entrepreneurship differences across the regions; the next chapter highlights the important regional differences in the institutional factors and their application differences across the states of India.
Although these factors are considered specifically in the context of entrepreneurship, they can explain the general environmental differences across the various Indian states in the area of development.
Institutional Environment: Interstate Differences 53
Introduction
Therefore, the attempt to quantify institutions and their quality in this study does not imply the claim to capture them adequately and perfectly but rather to compare the institutional environment across the states through the measured variables. It is also not amenable to using any absolute measurement of institutional environment or quality in terms of some unit. Therefore, the level of institutions indicating a better or worse institutional environment can at most only be ranked.
The composite institutional quality index method adopted in this study is to explain the inter-state differences in the institutional environment with the aggregation of variables and indices and to determine the relative position of the states.
Sources of Data and Methodology
- Simple Average Index
- The Penalty for Bottleneck (PFB) Index
Finally, the composite index of institutional quality is the simple arithmetic mean of all categorical sub-indices. The Composite Index of Economic Freedom for Indian States by Debroy and Bhandari (2014) is also constructed based on similar methodology. Similarly, Theory of Constraints (TOC) which is a management philosophy is also focused on the weakest link(s) in the chain for continuous improvement in system performance.
Therefore, the value of each indicator in a sub-index is penalized by linking it to the score of the indicator with the weakest performance.
Institutional Quality Index
- Index of Opportunity
- Index of Availability
- Index of Security
- Simple Average Institutional Quality Index
- PFB Institutional Quality Index
The credit-deposit ratio of the scheduled commercial banks varies widely across the Indian states. While PFB index of availability is the arithmetic mean of the PFB adjusted indicators (credit, education and information). The index of security as reported in table 3.8 provides an average view of the security environment of the states.
The position of the states does not change much in the security index adjusted by the PFB.
Clustering of States
Exploration of the Index
However, in the case of the Opportunity Index and the Availability Index, the coefficients show significant and high correlations, the coefficient is small and insignificant in the case of the security index. Therefore, the security environment has a relatively weaker representation in the final composite index of the institutional environment. Even the sub-indices Opportunity Index and Availability Index are positively and significantly correlated with each other, while the Security Index shows a negative relationship with the opportunity index.
Naturally, the PFB's institutional quality index takes into account the extreme imbalances between indicators and therefore produces a final value lower than that of the simple average index.
Institutional Quality in Different Time Periods (2006-07 and 2011-12)
Analysis and Conclusion
One policy and measure in all countries may show different results depending on the institutional strengths or weaknesses of different countries. Information on the institutional environment of states can contribute significantly to understanding the different levels of entrepreneurship in Indian states. According to which a policy can be effectively formulated that takes into account the different needs and concerns of the countries.
The final review is also available for general use in the form of Institutional Quality Indices.
Institutional Environment and Entrepreneurship 95
Introduction
Due to the existence and downward causation of institutions, entrepreneurs behave differently in different environmental conditions. Consequently, differences in institutional environments may play an important role in explaining the differences in entrepreneurial opportunities and activities across regions. Boettke & Coyne (2009) expressed that the variations in entrepreneurial opportunities and activities across the regions are not simply due to differences in entrepreneurial spirit, but rather due to differences in institutions.
Considering the above literature and arguments, this chapter is developed as an empirical exploratory work with the objective of identifying the relationship between the composite index of institutional quality and entrepreneurship across the states of India.
Entrepreneurship in the Empirical Context
- Different Proxies for Entrepreneurship Measurement
It seeks to make an addition to the studies and empirical evidence on the importance of the institutional environment/quality in the level of entrepreneurship. 2008). But this is a static view of entrepreneurship since the number of firms within a region or state is a stock variable (Nystrom, 2008). Most of the necessities-driven entrepreneurship in developing countries is in the informal sector (Desai, 2009).
The number of firms or enterprises per million population is used as an indicator of entrepreneurship in Indian states.
Sources of Data and Methodology
Therefore, in order to use the latest information, both these data have been added together to get the total number of registered MSMEs up to 2011-2012. The number of factories and MSMEs is normalized for population differences between states and reported as the number of factories and the number of registered MSMEs per million population. Moreover, the number of states (28) is small; therefore, panel data and techniques can substantiate the relationship between the variables.
The information on the various statistical and econometric techniques used in the analysis of the relationship between the institutional environment and the various measures of entrepreneurship is spelled out in detail.
Institutional Environment and Industries (Factories)
- Ordinary Least Squares (OLS) Model
- Control Variables
- Bootstrap Regression
- Exploration of the Impact of Sub-Indices
- Panel Data Regression
The dependent variable in the model is the number of factories per million population and the explanatory variable is the institutional quality scores of the countries. Therefore, both energy availability and road connectivity were used as control variables to determine the consistency of institutional quality scores across the number of factories. Differences in institutional quality scores across countries are important in determining differences in their entrepreneurial level in terms of number of factories.
The results in Table 4.5 show that differences in institutional quality among Indian states have a significant effect on the number of factories among them, and institutional quality ratings can be considered an important determinant of entrepreneurship.
Institutional Environment and MSMEs
- Ordinary Least Squares (OLS) Regression
- Control Variables
- Bootstrap Regression
- Exploration of the Impact of Sub-Indices
- Panel Data Analysis
A scatter diagram showing the relationship between the number of registered MSMEs (2008-09 to 2011-12) with institutional quality scores is drawn as Figure 4.3. The explanatory variable in the model is the institutional quality ratings of different countries. Therefore, we can conclude that institutional quality assessments are a strong determinant of entrepreneurship, measured by the number of registered MSMEs.
In the bootstrap linear regression results, the significance level of institutional environmental quality as a determinant of the number of MSMEs decreases (from 5% to 10%).
Some Other Observations
Note: ***significant at the 1 percent level; **significant at the 5% level and *significant at the 10% level. The share of these states in terms of volume and value of Private Equities Investment 2016 is over 96 percent, including NCR, and over 64 percent excluding NCR.
Analysis and Conclusion
Therefore, countries with a better quality of institutional environment may have more formal and registered companies; Improving various factors of the institutional environment can significantly improve the entrepreneurial scenario of a country or region. Therefore, the development of entrepreneurship always requires a better institutional environment and a better quality of institutional variables.
Thus, the number of MSMEs in 2011-12 is the result of adding these two numbers.
Summary of Findings, Conclusion and Policy Suggestions 129
Introduction
The index also shows differences in legal efficiency across India's various states, measured in terms of pendency of cases in courts and police, and the recovery rate of stolen property. All these differences between countries in terms of various determinants of institutional quality together create entrepreneurial differences between them. Changes in the institutional environment translate into changes in the number of enterprises between countries.
Summary of Findings
- Institutional Environment: Interstate Differences
- Institutional Environment and Industries (Factories)
- Institutional Environment and MSMEs
The study finds wide variation in the access of the masses to various sources of information (computer with Internet, television and radio) across the states of India. The overall institutional environmental outlook is different from individual performances in terms of different indicators. So, detailed information about the progress of the states in terms of different indicators is important.
The panel regressions indicate that the differences in institutional quality among the states in India are significant in determining the differences in entrepreneurship among them in terms of the number of MSMEs.
Conclusion
Various statistical and econometric techniques used for the analysis indicate that entrepreneurial activities through enterprises are consistently related to the institutional environment of the states. Although infrastructure variables have a positive influence on entrepreneurship, they do not detract from the importance of the quality of institutions. Even the presence of the factories does not detract from the importance of a better institutional environment for the MSMEs in India.
Therefore, countries with a better quality of institutional environment may have more formal and registered companies; while countries with a weaker institutional environment have a lower level of entrepreneurship.
Policy Suggestions
Consequently, detailed information on each country and each indicator is useful for understanding the countries' institutional environment, their differences with other countries, and their obstacles. So there is always a demand for institutional reform for any type of entrepreneurship development. Other entrepreneurship policy measures should always be complemented with institutional reform measures, and institutional reform can be achieved through specific variables such as urbanization, credit reform, security, GER growth, etc.
Policy initiatives should focus on the general environment (institutional environment), and subsequent business incubation center initiatives would then target the entrepreneurial capabilities of countries.
Scope for Future Research
2015), “Regional use of the Global Entrepreneurship and Development Index: the case of Spain”, Regional Studies, Vol. 2008), Research Methods Consulting: A Consultant's Companion, Johannes Vancessel Publishing: The Netherlands. 2005), “Institutional barriers to the operation of small and medium-sized enterprises in countries in transition”, Small Business Economics, Vol. 2009), "Entrepreneurial Entry: Which Institutions Matter?". 2000), “The promise of entrepreneurship as a research field”, Academy of Management Review, Vol. 2014), “Theory of Constraints: A Literature Review”, Procedia-Social and Behavioral Sciences, Vol.
Economics, Retrieved from: www.Uni-. 2013), “Institutional and economic determinants of opportunity perception and entrepreneurial intention”, Investigaciones Regionales, Vol. 1973), “Markets and Hierarchies: Some Basic Considerations”, American Economic Review, Vol. 2000), “The New Institutional Economics: Taking Stock, Looking Ahead”, Journal of Economic Literature, Vol.
