https://doi.org/10.1177/0266242618766235 International Small Business Journal: Researching Entrepreneurship 1–26 © The Author(s) 2018 Reprints and permissions: sagepub.co.uk/journalsPermissions.nav DOI: 10.1177/0266242618766235 journals.sagepub.com/home/isb Small Firms i s b j Entrepreneurs and innovation: The contingent role of institutional factors Lucio Fuentelsaz and Juan P Maicas University of Zaragoza, Spain Javier Montero University of Zaragoza, Spain; University of Deusto, Spain Abstract Entrepreneurs play a key role in introducing innovations into the market. However, the extant literature has found that the degree of innovation within new ventures varies considerably and that these differences can be related to the individual factors of entrepreneurs. In this article, we go one step further and suggest that the influence of individual factors on innovation is contingent on the institutional context. We use a sample of more than 140,000 entrepreneurs from 101 countries that have participated in the Global Entrepreneurship Monitor (GEM) project between 2005 and 2015. Our results show that individual characteristics of the entrepreneur, such as risk tolerance, entrepreneurial alertness, education and previous entrepreneurial experience, influence innovation in new ventures but that their effect is reinforced by an institutional context with high economic freedom. Keywords economic freedom, entrepreneurship, innovation, institutions, start-ups Introduction Innovation plays a key role in market economies (Baumol, 2002). It is considered one of the main drivers of economic development and an important source of competitive advantage and firm sur- vival (Barney, 1991; Baumol, 2002; Martins et al., 2015). Entrepreneurs are crucial in this process; they are instrumental in introducing innovations to the market while also searching for novel com- binations of resources to create new products or services (Schumpeter, 1934). New ventures have Corresponding author: Javier Montero, Deusto Business School, University of Deusto, Mundaiz 50, San Sebastian 20012, Spain. Email: montero@unizar.es 766235ISB 0 0 10.1177/0266242618766235International Small Business JournalFuentelsaz et al. research-article 2018 Full Paper