Entrepreneurship and social capital: a multi-level analysis

Purpose: The purpose of this paper is to examine the relationship between an individual's social capital context and entrepreneurship using a multi-level modelling framework. Design/methodology/approach: This paper uses data from 87,007 individual level observations across 428 regions in 37 countries. The data comes from the 2010 and 2016 Life in Transition Surveys. The paper uses a principal component analysis to identify the different dimensions of an individual's social capital context. Subsequently, a multi-level model is employed examining the relationship between the components of an individual's social capital context and entrepreneurship (which is proxied by an individual's attempt to set up a business), whilst controlling for both country and regional effects. Findings: Greater levels of networking, informal connections and tolerance of others have a significant positive relationship with entrepreneurial activity. Trust of institutions and others have a negative relationship with entrepreneurial activity. Regional and country differences are also important for entrepreneurship, demonstrating the importance of the multi-level and social contextual environment for business development. Originality/value: Firstly, the authors present a broad, but comprehensive social contextual framework incorporating many measures of social capital when examining the importance of social capital for business development. Secondly, the work provides interesting results on the “bright and dark sides of trust” for entrepreneurship, answering calls for improved understandings on the positive and negative relationships between social capital and entrepreneurial activity. Thirdly, the paper extends the burgeoning but limited number of studies that examine the multi-level contextual environment of entrepreneurial activities.