Contents lists available at ScienceDirect Journal of Business Research journal homepage: www.elsevier.com/locate/jbusres Market-driven entrepreneurship and institutions ☆,☆☆ Abdul Ali a,1 , Donna J. Kelley a, ⁎ , Jonathan Levie b a Babson College, Arthur M. Blank Center for Entrepreneurship, Babson Park, MA 02457, United States of America b J.E. Cairnes School of Business & Economics, NUI Galway, Ireland ARTICLE INFO Keywords: Market-driven entrepreneurship Corporate entrepreneurship Opportunity motives Innovation Institutional theory Opportunity costs ABSTRACT This research seeks to explain how particular conditions in the external environment are associated with market- driven entrepreneurship—more specifically, startup or early-stage business activity that addresses opportunities in the market (opportunity-driven entrepreneurship), and that which offers unique and novel products or ser- vices to customers (innovative entrepreneurship). We further acknowledge that environmental conditions can also affect existing organizations, and thereby identify a third form of entrepreneurial activity: corporate en- trepreneurship. Analyses of 44 economies show that economies with basic institutional conditions (structures and rules that govern business activity), and efficiently functioning markets, have high rates of both innovative entrepreneurship and corporate entrepreneurship. However, external contexts that foster innovation are nega- tively linked to both opportunity-driven and innovative entrepreneurship, while exhibiting a positive association with corporate entrepreneurship. 1. Introduction Market-driven entrepreneurship combines marketing and en- trepreneurship logics, addressing opportunities in the market (oppor- tunity-driven entrepreneurship) and introducing innovative products and services that are new and unique for customers (innovative en- trepreneurship) (Collinson & Shaw, 2001; Hills, Hultman, & Miles, 2008; Hills & LaForge, 1992). While all entrepreneurs rely on customers for survival, those who are driven by perceived gaps in the market and who provide novel and unique offerings have new value creation for customers at their core, in contrast to entrepreneurs who are driven to start businesses by the absence of other forms of making a living (Fairlie & Fossen, 2018; Galindo & Méndez, 2014; Simón-Moya, Revuelto- Taboada, & Guerrero, 2014). Entrepreneurial individuals may also choose to express their en- trepreneurial talent for the benefit of their employers (Schumpeter, 1934, pp. 74–75; Stam, 2018), by initiating new forms of value creation as employees of established organizations that are already embedded in a competitive landscape. We refer to corporate entrepreneurship as a form of entrepreneurship where an individual plays a leading role in developing new activities for their main employer, such as developing or launching new goods or services, or setting up a new business unit, a new establishment or subsidiary (Bosma, Wennekers, & Amorós, 2012). Whether individuals make such attempts in the organizations they work for may depend on conditions in the environment (Baker, Gedajlovic, & Lubatkin, 2005; Boettke & Coyne, 2009). Market-driven entrepreneurship research has mainly focused on the impact of market-driven entrepreneurial behavior on sustainable com- petitive advantage at the firm level (e.g., Weerawardena & O'Cass, 2004). However, nations differ in the quality of their institutions (the structures and rules that govern business activity); and the study of the relationship of such conditions to entrepreneurship composes a pro- mising research stream (Galindo & Méndez, 2014; Hoskisson, Covin, Volberda, & Johnson, 2011; Simón-Moya et al., 2014). As recent re- search has revealed (Simón-Moya et al., 2014), stage of economic de- velopment may partially account for national differences in prevalence rates of types of entrepreneurship; but a more fine-grained analysis should reveal underlying factors, such as the basic institutional en- vironment and conditions more specifically associated with the func- tioning of business activity. It is critical to note that the overall impact of entrepreneurship on a society is determined not just by the frequency with which its citizens https://doi.org/10.1016/j.jbusres.2019.03.010 Received 29 September 2017; Received in revised form 2 March 2019; Accepted 4 March 2019 ☆ The authors would like to acknowledge the GEM national teams who administered the GEM survey in their economy and provided data for this research. The authors also wish to thank Peter Gratzke and the World Economic Forum for their joint effort with GEM in producing the report, “Leveraging Entrepreneurial Ambition and Innovation: A Global Perspective on Entrepreneurship, Competitiveness, and Development”, which inspired this research. ☆☆ Donna Kelley and Jonathan Levie would like to dedicate this paper to the memory of our dear friend and valued colleague, Abdul Ali. ⁎ Corresponding author. E-mail addresses: dkelley@babson.edu (D.J. Kelley), jonathan.levie@nuigalway.ie (J. Levie). 1 Deceased. Journal of Business Research xxx (xxxx) xxx–xxx 0148-2963/ © 2019 Elsevier Inc. All rights reserved. Please cite this article as: Abdul Ali, Donna J. Kelley and Jonathan Levie, Journal of Business Research, https://doi.org/10.1016/j.jbusres.2019.03.010