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A framework for linking entrepreneurial ecosystem with institutional factors:

a modified total interpretive structural modelling approach

Article  in  J for Global Business Advancement · July 2019

DOI: 10.1504/JGBA.2019.10022953

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382 J. Global Business Advancement, Vol. 12, No. 3, 2019

A framework for linking entrepreneurial ecosystem

with institutional factors: a modified total interpretive
structural modelling approach

Shiwangi Singh* and Shuchi Sinha

Department of Management Studies,
Indian Institute of Technology Delhi,
Hauz Khas, New Delhi – 110016, India
Email: shiwangi.iitd@gmail.com
Email: shuchisinha02@gmail.com
*Corresponding author

Vellupillai Mukunda Das and Anuj Sharma

Chandragupt Institute of Management Patna,
Mithapur Bus Stand Road,
Mithapur, Patna – 800001, Bihar, India
Email: vmknd.das@gmail.com
Email: anuj@cimp.ac.in

Abstract: This paper presents a model of the interactions among and between
different institutional and entrepreneurial ecosystem factors, based on a
modified total interpretive structure modelling (m-TISM) approach. Previous
literature holds diverse views about the influence of institutional factors on the
entrepreneurial ecosystem. This necessitates a comprehensive understanding of
the interrelationships among and between various factors that can impact a
country’s entrepreneurial ecosystem positively. The literature review identifies
four institutional and three entrepreneurial ecosystem factors. The m-TISM
followed by MICMAC analysis is performed for studying and analysing the
mutual interaction between identified factors, and to know the driver-dependent
relationships. The results identify four levels of institutional and entrepreneurial
ecosystem factors, and establish the hierarchy among them. This paper
proposes m-TISM based structural framework for the entrepreneurial
ecosystem. It also exemplifies a phased procedure for conducting m-TISM,
which could simplify the comprehension for other researchers.

Keywords: institutional factors; TISM; total interpretive structure modelling;

entrepreneurial ecosystem; political stability; rule of law; government
effectiveness; regulatory quality; ease of starting business; ease of paying taxes;
ease of resolving insolvency.

Reference to this paper should be made as follows: Singh, S., Sinha, S.,
Mukunda Das, V. and Sharma, A. (2019) ‘A framework for linking
entrepreneurial ecosystem with institutional factors: a modified total
interpretive structural modelling approach’, J. Global Business Advancement,
Vol. 12, No. 3, pp.382–404.

Copyright © 2019 Inderscience Enterprises Ltd.

 A framework for linking entrepreneurial ecosystem with institutional factors 383

Biographical notes: Shiwangi Singh is a research scholar in Strategic

Management Area at the Department of Management Studies (DMS),
IIT Delhi. She is gold medallist during her studies in graduation and
post-graduation. Her area of research is the strategic management, innovation,
implementation of innovation, and start-ups. Her research papers were selected
for presentations at various research conferences like PANIIT International
Management Conference (PANIITIMC), Academy of International Business
(AIB) India Chapter, and Academy for Global Business Advancement
(AGBA). She has also been conferred with “Best Paper Award” at AGBA
Conference, 2018.

Shuchi Sinha is a Faculty Member in the area of Human Resource Management

and Organization Behaviour at the Department of Management Studies,
Indian Institute of Technology Delhi. A PhD from University of London, she
has taught and researched in the areas of Leadership, Identity work, Workplace
Spirituality and other aspects of organisation studies at various universities
of repute in the UK and IIT Delhi, India. Her work has been presented and
published in reputed international conferences and journals.

Vellupillai Mukunda Das is a gold medallist from Kerala University and has a
PhD in Management. He has over 33 years of experience in management
teaching, research, and consultancy at both Indian and international
organisations. He has worked in Indian Institute of Management, Ahmedabad,
Management Development Institute, New Delhi, Institute of Rural
Management, Anand, Indian Institute of Management, Kozhikode, Indian
Institute of Information Technology and Management, Kerala and now,
he is the Director of Chandragupt Institute of Management Patna, Bihar.

Anuj Sharma is an Assistant Professor at Chandragupt Institute of Management

Patna. With an academic and professional background in information systems,
his research interest focuses primarily upon adoption of emerging and
cutting-edge information technology in general and the impact of this on
organisations in particular. His work has been published in leading academic
journals and conference proceedings. He also has versatile experience in
handling large scale government sponsored consultancy projects.

1 Introduction

Entrepreneurs by definition have the ability to perceive opportunities, take risks and
create something new. Entrepreneurship is good for society and is broadly perceived as
the principal agent for countries’ economic growth (Mason and Brown, 2013; Naude,
2010; Wong et al., 2005). It provides space for creative destruction, a roadmap for
innovation, opportunities for job creation, and a possibility for poverty reduction (Sutter
et al., 2019; Slade Shantz et al., 2018; Zhao and Lounsbury, 2016; Bruton et al., 2013;
Kent and Dacin, 2013; Naudé, 2010; Chowdhury, 2007; Sander and Thurik, 1999).
Small ventures lead to self-employment and a source of income (Fisher and Lewin, 2018;
Martín-Montaner et al., 2018; Fritsch and Wyrwich, 2018; Dimova and Pela, 2018;
Sorgner and Fritsch, 2018; Frid et al., 2016; Alvarez et al., 2011), therefore, leading to
development of developing economies (Bosma et al., 2018; Naudé, 2010).
The ecosystem is defined as a complex system involving various stakeholders.
Tansley (1935) used the idea of the ecosystem in the area of biology. Later, Moore
384 S. Singh et al.

(1993) introduced the concept of the ecosystem to management literature. An

entrepreneurial ecosystem is an inter-connected network of organisations operating
around specific firm/product/service. The interconnected network consists of various
stakeholders, including entrepreneurs (individuals), entrepreneurial organisations
(e.g., firms, banks, and venture capitalist), institutions (government and private), and the
process of entrepreneurship (Roundy et al., 2017; Spigel, 2017; Mason and Brown,
2014). The interaction leads to an efficient allocation of resources and creation of new
venture opportunities (Acs et al., 2014; Low and Abrahamson, 1997).
Institutional factors play an encouraging role in promoting entrepreneurship
(Boudreaux et al., 2019; Dilli and Westerhuis, 2018; Bylund and McCaffrey, 2017;
Churchill, 2017; Alrashdan and Almujamed, 2017; Bianchi et al., 2015; Akoum, 2009).
Institutions are comprehended as conventions, habits, rules, and regulations which play a
significant part in choosing how individuals relate to each other and how they utilise
their information. Organisations modify their policies and strategies according to the
framework provided by the institutions (Krueger et al., 2000; Aidis et al., 2008).
Global entrepreneurship monitor has listed the essential elements of institutional factor
necessary for the development of entrepreneurship in a country, which includes good
political governance, supportive government policies, and efficient legal infrastructure.
Formal rules and regulations are intended to encourage trade practices and lessen costs.
Weak implementation of formal rules has an unfavourable effect on the growth of
entrepreneurial firms. Countries with weak institutions establishment may not encourage
the productive entrepreneurship (Parker, 2009). The presence of strong institutional setup
can help to boost the entrepreneurial initiatives (Baumol and Strom, 2007). Baumol
(1990) contended that, even if the countries are provided with the same set of
entrepreneurs, the entrepreneurial activity will differ among them with a change in the
institutional structure. The institutional environment is vital to have a comprehensive
understanding of the creation of a new venture.
Various studies has been conducted on the parameters linking one or two institutional
factors with entrepreneurial ecosystem (Asongu et al., 2018; Canare, 2018; Haggard and
Haggard, 2018; Rodríguez-Gulías et al., 2018; Hoogendoorn, 2016; Šebestová, 2016;
Mason, 2009). Aidis et al. (2008) highlight in future research that relationship between
institutional factors and entrepreneurial activity needs to be explored. The institution’s
impact on the economy has been studied by a group of researchers (like Acemoglu and
Robinson, 2012; Acemoglu et al., 2005). However, the scant literature has ignored the
probable relevant inter-level mechanisms and linkages between institutional factors and
entrepreneurship (Bjørnskov and Foss, 2016). This study aims to capture a holistic view
of the institutional impact on the entrepreneurial ecosystem of a country.
The study mainly contributes in three ways to the existing literature of
entrepreneurship. Firstly, it reviews and builds upon the institutions and entrepreneurship
literature and identifies different types of institutional factors and entrepreneurial
ecosystem factors, and the relationships between them. Secondly, it exemplifies a phased
procedure for conducting modified TISM, which simplifies comprehension for other
researchers. Thirdly, it provides a basis for policy formulation through the analysis of
entrepreneurial ecosystems across countries with different institutional setups.
 A framework for linking entrepreneurial ecosystem with institutional factors 385

This study pursues the following research objectives:

• to map the hierarchical interrelationships among the institutional factors
• to identify how entrepreneurial ecosystem is affected by different institutional
factors.

2 Literature review

2.1 Entrepreneurial ecosystem

The entrepreneurial ecosystem consists of interlinked stakeholders, including
entrepreneurs (individuals), institutions (government and private), entrepreneurial
organisations (e.g., banks, venture capitalists, and firms), and the process of
entrepreneurship (Roundy et al., 2017; Spigel, 2017; Mason and Brown, 2014). Critical
factors of the entrepreneurial ecosystem include entrepreneurial actions (Stam, 2014),
management of business functions (Stam, 2014; Feld, 2012), R&D and institutions
(Isenberg, 2010; Aidis et al., 2008; Audretsch and Link, 2017). Successful
entrepreneurship, therefore, requires cooperation and coordination of various stakeholders
including start-ups, large organisations, small businesses, public institutions, private
institutions, and enthusiastic individuals. Entrepreneurship requires an entire ecosystem,
each part of which has its range of stakeholders along with, a role for government in
providing support and making necessary reforms (Isenberg, 2010). Isenberg highlights a
few points about how to make entrepreneurship successful. He first mentions the
entrepreneurs should not be taken for granted and entrepreneur’s voice should be heard.
Secondly, the policies should not be framed in isolation but should be able to meet the
needs of start-ups and organisations. Thirdly, entrepreneurship should be at a top priority
of government, and the entrepreneurs should be promoted. Fourthly, effort needs to be
exerted towards cultivation of an entire entrepreneurship ecosystem.
A favourable entrepreneurial ecosystem is an essential requirement for the success of
new ventures. Various stakeholders’ efforts together can help organisations to develop
new activities. The support from various stakeholders would help in reducing the
problem of unemployment and will support the growth of an economy (Gherhes et al.,
2018; Cueto et al., 2017; Spigel, 2017; Wennekers and Thurik, 1999; Bartlett and
Rangelova, 1997). The policymakers and researchers are presently perceiving the
importance of systemic support towards a holistic approach for the development of
start-up culture, easing the process of getting data, providing financial support to new
ventures, and infrastructure (Siam, 2017; Dahlan, 2016; Mukhtar and Redman, 2015;
Sethna et al., 2014; Hashim, 2013; Rodriguez-Pose, 2013; Cetin and Khan, 2012;
Aeron and Jain, 2012; Yu and Kwan, 2011; Isenberg, 2010; Mersha et al., 2010;
Thrassou and Philip, 2008).

2.1.1 Drivers of entrepreneurial ecosystems

The views about the access to finance, market, and infrastructure, administrative support
and institutions (Saxenian, 1994) form a basic framework of the entrepreneurial
ecosystem. It is essential to modify entrepreneurial practices according to local conditions
in order to develop a facilitative entrepreneurial ecosystem. (Isenberg, 2010).
386 S. Singh et al.

The literature talks about the three holistic components to describe entrepreneurial
ecosystem including ease of starting a business (Berg and Cazes, 2007; Gani, 2011;
Grandon and Pearson, 2004), ease of paying taxes (Grandon and Pearson, 2004), and ease
of resolving insolvency (Gani, 2011; Grandon and Pearson, 2004). Also, 10 factors
studied by Asongu et al. (2018) on entrepreneurial ecosystem can be categorised into
three broad factors namely, ease of starting business (cost of procedures involved;
number of steps involved in registering and starting business; time required to register a
business and enforcing contract), ease of resolving insolvency (time and procedural steps
for resolving an insolvency), and ease of paying taxes (time for preparing and paying
taxes).

2.1.1.1 Ease of resolving insolvency

It is measured by the time, cost and procedure required for resolving insolvency.
The lesser the time, cost and procedure, the greater is the ease of resolving insolvency.
Entrepreneurs are generally affected by insolvency regulations (Fu et al., 2018).
Insolvency framework provides cost-effective, quick, and transparent resolution to solve
financial distress and also leads to better chances of survival for viable businesses
(Nigam and Boughanmi, 2017).

2.1.1.2 Ease of paying taxes

It is measured by the time, cost and procedure required for paying taxes. Lesser the time,
cost and procedure, easier it is to pay taxes. Lesser taxes on start-ups enable businesses to
encourage innovation and job creation (Blanchard, 2008).

2.1.1.3 Ease of starting business

It is measured in terms of cost, procedure and time needed to start a company. Lesser the
cost, time and procedure, the easier it is to start a business. It also affects the economic
development of a country (Haggard and Haggard, 2018). Ease of doing business has a
positive impact on business creation (Canare, 2018).

2.2 Institutional factors

‘Institutional’ refers to a formal structure and set of rules deriving from the regulatory
structure, governmental bodies, and other cultural and social practices of a society
(Bruton et al., 2010; DiMaggio and Powell, 1991). Researchers mainly deal with political
stability, regulatory quality, government effectiveness, rule of law, and the frequency of
use of the law.
Institutional theory has become a frame of reference used by many researchers to
study the impact of various institutions that are beyond the control of firm, especially
in start-ups studies (Su et al., 2016). Institutional theory helps to study how different
institutional factors affect the behaviour of entrepreneurs (Bruton et al., 2009).
Institutional factors play an important role in clarifying the role of entrepreneurs and
firms with the help of rules (both formal and informal), and their enforcement. Formal
institutions help the entrepreneurial ventures to reduce costs and risks associated with
market transactions (Meyer et al., 2009). They also have an impact on entrepreneurs
 A framework for linking entrepreneurial ecosystem with institutional factors 387

seeking to take advantage of environmental start-up opportunities (Scott, 1992; North,

1990). Bruton et al. (2010) described how institutional factors impact entrepreneurs’
attitudes by way of either hindering or helping individuals to start, grow and manage
businesses.

2.3 Compliance and rules based factors

Institutional factors play an important role in facilitating the entrepreneurial ecosystem.
Institutions are defined as complaince procedures, a set of rules, and behavioural
procedures that can impact the behaviour of individual for maximising wealth (North,
1990). Institutions can help to create an environment that protects start-ups, and thereby
strengthens the entrepreneurial ecosystem (Weele et al., 2018). This paper focuses on the
compliance and rules based factors of the institutions. Institutional factors can provide
guidelines to policymakers, which can help to strengthen partnerships between
‘policymakers’ and ‘entrepreneurs’. Policy makers facilitate entrepreneurial ecosystem
by optimally allocating the resources and building a base of better tomorrow (Fosu, 2013;
Anyanwu and Erhijakpor, 2014).
The regulatory framework, bureaucratic reforms, and entrepreneurs are the primary
agents of an effective entrepreneurial ecosystem (Audretsch and Belitski, 2017;
Audretsch and Lehmann, 2016; Isenberg, 2010). If entrepreneurs are burdened by
excessive procedures, rules, and regulations they can become discouraged from starting
new businesses (McMullen et al., 2008). If the resource allocation is efficient and the
government policies support the public in general, then it helps in generating more jobs
and also increases the sources of finance (Stenholm et al., 2013; North, 1990) creates an
environment which is conducive for the starting the new businesses.
Recent literature on institutional factors and entrepreneurship elaborates on the role of
rules and compliance based procedures in creating more start-ups (Aidis et al., 2008).
An efficient relationship characterised by political stability and proper implementation of
the laws, which is positively related to creating an effective ecosystem that encourages
entrepreneurs to create more ventures (Baumol et al., 2009).
Researchers have predominantly focused on institutional factors such as regulatory
quality (Asongu et al., 2018; Amavilah et al., 2017; Kaufmann et al., 2011; Torgler and
Schneider, 2009; Das et al., 2003), rule of law (Asongu et al., 2018; Amavilah et al.,
2017; Haidar, 2012; Kaufmann et al., 2011; Torgler and Schneider, 2009), political
stability (Asongu et al., 2018; Amavilah et al., 2017; Haidar, 2012; Kaufmann et al.,
2011; Das et al., 2003), and government effectiveness (Asongu et al., 2018; Amavilah
et al., 2017; Kaufmann et al., 2011; Torgler and Schneider, 2009; Das et al., 2003).
These indicators enhance the political governance, economic governance and institutional
governance (Asongu et al., 2018).

2.3.1 Regulatory quality and entrepreneurial ecosystem

Regulatory quality concentrates on policy formulation and implementation (Torgler and
Schneider, 2009). The regulatory practices help to build the credibility of the regulatory
agencies and promote market practices among stakeholders (Das et al., 2003). Regulatory
quality positively impacts the entrepreneurial ecosystem of a country. Start-ups get
388 S. Singh et al.

benefits from favourable institutions, in specific public sector expenditure and regulatory
quality (Hoogendoorn, 2016). Regulatory quality helps in preparing and implementing
regulations which foster entrepreneurial ecosystem (Marneffe and Vereeck, 2011).

2.3.2 Rule of law and entrepreneurial ecosystem

Rule of law helps to reduce cost of business, for example, it helps to reduce the time to
resolve insolvency, number of business procedures, and the time to build a warehouse,
thus boosting entrepreneurial ecosystem (Asongu et al., 2018). It also shapes the market
future (Lester, 2017). The fast rules and regulations related to start-ups help in
establishing a business, and it also helps in the existence of supporting services for
owners of business and established firms (Šebestová, 2016).

2.3.3 Political stability and entrepreneurial ecosystem

Political stability measures likelihood of stabilisation of government. It helps in reducing
the cost of business start-up procedure (Asongu et al., 2018). It helps in formulating a
coherent policy on matters such as macro stability, privatisation, taxation, the building of
information and legal infrastructures. It thus helps to formulate long-term policies to
boost the entrepreneurial ecosystem.

2.3.4 Government effectiveness and entrepreneurial ecosystem

Government effectiveness is the input required by the government for the development
and implementation of policies (Torgler and Schneider, 2009). It has a significant
positive impact on start-ups (Rodríguez-Gulías et al., 2018). It also leads to the
development of suitable methods and strategies that can accurately measure investment
pattern in the angel investment activity and early stage venture capital market (Mason,
2009).

3 Methodology

Modified total interpretive structural modelling (m-TISM) (Bamel et al., 2019; Hasan
et al., 2019; Nisha et al., 2017; Sushil, 2017) is the extension of TISM (Sushil, 2012) and
ISM (Warfield, 1974) to the knowledge of interrelationships, the degree of association
and the logic behind relationships. Three basic questions are answered by the TISM
methodology: what, how and why (Sushil, 2012). It provides the interpretation of the
significant and transitive links and nodes. Figure 1 lists the core steps of TISM.
In m-TISM the basic TISM steps I, II and III are merged.
Step I: Identification of elements to be linked, a pair-wise comparison of elements to be
linked, translation of matrix into binary reachability matrix, and transitivity check of
elements. In m-TISM firstly identify the elements to be linked and then carry out a pair
wise relation.
For example, we take three elements a, b and c, the pairwise relation will be
established as:
 A framework for linking entrepreneurial ecosystem with institutional factors 389

• a – b: a influences b – we code it as 1 in ab cell

• b – a: b influencing a, we code 1 in ba cell
• a = b: if both affect each other then 1 in both ab and ba cell
• a – b or b – a: No relationship then we code 0 in both ab and ba cell.

Figure 1 Core steps of ISM/TISM methodology

The transitivity is checked simultaneously as

• a = b and b = c, then a = c
• a = b/a – b and b = c/b – c then a – c
• a = b/b – a and b = c/c – b then c – a.
Step II: Hierarchical partitioning.
Level partitioning is conducted by the intersection set obtained by determining
common factors between the antecedent set and the reachability set of the matrix.
The comparison is further performed for all the elements to be linked.
Step III: Prepare diagraph.
Step IV: Translate diagraph into the interpretive model.
390 S. Singh et al.

4 Modified-TISM for institutional factors impacting the entrepreneurial

ecosystem

Step I: Identification of elements to be linked, a pair-wise comparison of elements to be

linked, translation of matrix into binary reachability matrix, and transitivity check of
elements.
Four institutional factors including regulatory quality, political stability, rule of law,
and government effectiveness, and three entrepreneurial ecosystem factors including ease
of paying taxes, resolving insolvency, and starting business are identified through
literature review. The pairwise comparison is for n × (n – 1) pairs. Table 1 shows the
pairwise comparison of factors. The Y shows the existence of the relationship,
and N shows the absence of a relationship.
The self-interaction matrix is converted to binary matrix in Table 2. The ‘Y’ code is
written as 1 and ‘N’ code in written as 0.

Table 1 Structural self-interactive matrix (SSIM)

F1 F2 F3 F4 F5 F6 F7
RQ RoL PS GE EoRI EoPT EoSB
F1 RQ Y Y Y Y N Y Y
F2 RoL Y Y Y N N N N
F3 PS N N Y N Y N N
F4 GE Y N Y Y Y Y Y
F5 EoRI N N N N Y Y Y
F6 EoPT N N N N N Y N
F7 EoSB N N N N N N Y

Table 2 is checked for the transitive rule. The transitive links are updated as 1*
(Table 3), and the diagraph is prepared showing the links between the elements
(Figure 2).

Table 2 Initial reachability binary matrix

F1 F2 F3 F4 F5 F6 F7
RQ RoL PS GE EoRI EoPT EoSB
F1 RQ 1 1 1 1 0 1 1
F2 RoL 1 1 1 0 0 0 0
F3 PS 0 0 1 0 1 0 0
F4 GE 1 0 1 1 1 1 1
F5 EoRI 0 0 0 0 1 1 1
F6 EoPT 0 0 0 0 0 1 0
F7 EoSB 0 0 0 0 0 0 1

Steps II: Hierarchical partitioning.

Hierarchical partitioning of the elements is performed by obtaining the intersection
set, which is the common elements between the antecedent set and the reachability set of
 A framework for linking entrepreneurial ecosystem with institutional factors 391

the matrix obtained through the transitive check. When the elements are common in the
interaction and reachability set, that element is leveled as I. Then, iteration II is
performed, and the same process is repeated. Table 4 illustrates the level partitioning of
elements.

Table 3 Transitive reachability matrix

F1 F2 F3 F4 F5 F6 F7
RQ RoL PS GE EoRI EoPT EoSB
F1 RQ 1 1 1 1 1* 1 1
F2 RoL 1 1 1 1* 1* 1* 1*
F3 PS 0 0 1 0 1 1* 1*
F4 GE 1 1* 1 1 1 1 1
F5 EoRI 0 0 0 0 1 1 1
F6 EoPT 0 0 0 0 0 1 0
F7 EoSB 0 0 0 0 0 0 1
*Denotes the values which are changed from ‘0’ to ‘1’ which have transitive links.

Figure 2 Diagraph showing the linkages between the factors

Step III: Prepare diagraph.

The diagraph is drawn (Figure 3) by composing each factor at its individual
respective level obtained in Step II, and the links are drawn according to the reachability
matrix.
Step IV: Translate diagraph into the interpretive model.
Modified-TISM is developed for studying the interrelationship among the
institutional factors impacting the entrepreneurial ecosystem. The links are also provided
with interpretation as obtained from the relationship between elements (Appendix II), and
final interpretive diagraph is obtained (Figure 4).

MIC-MAC analysis: On the basis of dependence and driving power, institutional and
entrepreneurial ecosystem factors are cateogrised into four different quadrants (Table 5)
namely, independent, linkage, dependent, and autonomous factor as shown in Figure 5
MICMAC analysis.
392 S. Singh et al.

Autonomous factors (Quadrant I): The factors falling in this quadrant have weak driving
and dependence power. We do not have any enabler in this quadrant.
Dependent factors (Quadrant II): The factors falling into this quadrant have strong
dependence power and weak driving power. Three factors fall into this quadrant; they are
ease of starting business, paying taxes, and resolving insolvency.
Linkage factors (Quadrant III): The factors falling into this quadrant have both strong
driving power and dependence power. In this quadrant, we have one factor, i.e., political
stability.
Independent factors (Quadrant IV): The factors falling into this quadrant have weak
dependence but strong driving power. In this quadrant, we have two factors,
i.e., government effectiveness and rule of law.

Table 4 Hierarchical partitioning

Factors Reachability set Antecedent set Intersection set Level

Iteration 1
F1 1, 2, 3, 4, 5, 6, 7 1, 2, 4 1, 2, 4
F2 1, 2, 3, 4, 5, 6, 7 1, 2, 4 1, 2, 4
F3 3, 5, 6, 7 1, 2, 3, 4 3
F4 1, 2, 3, 4, 5, 6, 7 1, 2, 4 1, 2, 4
F5 5, 6, 7 1, 2, 3, 4, 5 5
F6 6 6 6 I
F7 7 7 7 I
Iteration 2
F1 1, 2, 3, 4, 5 1, 2, 4 1, 2, 4
F2 1, 2, 3, 4, 5 1, 2, 4 1, 2, 4
F3 3, 5 1,2,3,4 3
F4 1, 2, 3, 4, 5 1, 2, 4 1, 2, 4
F5 5 1, 2, 3, 4, 5 5 II
Iteration 3
F1 1, 2, 3, 4 1, 2, 4 1, 2, 4
F2 1, 2, 3, 4 1, 2, 4 1, 2, 4
F3 3 1, 2, 3, 4 3 III
F4 1, 2, 3, 4 1, 2, 4 1, 2, 4
Iteration 4
F1 2, 3, 4 2, 3, 4 2, 3, 4 IV
F2 2, 3, 4 2, 3, 4 2, 3, 4 IV
F4 2, 3, 4 2, 3, 4 2, 3, 4 IV
 A framework for linking entrepreneurial ecosystem with institutional factors 393

Table 5 Driving and dependence power of factors

F1 F2 F3 F4 F5 F6 F7
Driving
RQ RoL PS GE EoRI EoPT EoSB power
F1 RQ 1 1 1 1 1* 1 1 7
F2 RoL 1 1 1 1* 1* 1* 1* 7
F3 PS 0 0 1 0 1 1* 1* 4
F4 GE 1 1* 1 1 1 1 1 7
F5 EoRI 0 0 0 0 1 1 1 3
F6 EoPT 0 0 0 0 0 1 0 1
F7 EoSB 0 0 0 0 0 0 1 1
Dependence power 3 3 4 3 5 6 6
*Denotes the transitive links.

Figure 3 Hierarchical relationship among elements (see online version for colours)
394 S. Singh et al.

Figure 4 Interpretive m-TISM model (see online version for colours)

Figure 5 MICMAC analysis

 A framework for linking entrepreneurial ecosystem with institutional factors 395

5 Discussion and implications

This paper identifies institutional and entrepreneurial ecosystem factors and establishes
interlinkages among them. The identified institutional factors are rule of law, government
effectiveness, regulatory quality, and political stability. The entrepreneurial ecosystem
factors are ease of resolving insolvency, ease of paying taxes, and ease of starting
business. The relationship between each element is studied through the support of
literature (Appendix II).
With the aid of m-TISM, the paper analyses the impact of the factors, their relative
importance, mutual relationships, and interdependence among them. The study also
establishes the hierarchical relationships among the factors that helps in understanding
the drivers and dependencies. The MIC-MAC analysis helps to determine the relative
importance and dependency of factors. Through hierarchical partitioning and MIC-MAC
analysis, factors placed at level I include ease of starting a business, ease of paying taxes,
and ease of resolving insolvency is placed at level II. Political stability is at level III,
and factor identified at level IV includes government effectiveness, rule of law, and
regulatory quality.
The MICMAC analysis helped us to analyse the dependent factor (ease starting a
business, ease of paying taxes, and ease of resolving insolvency), linkage factor (political
stability), and independent factor (rule of law, government effectiveness, and regulatory
quality).
The factors having high dependency and weak driving power are in the level I and
level II of the hierarchy. Consequently, policy-makers and practitioners should firstly
focus on these enablers. The factors which have high dependence and driving power are
unstable enablers which are PS (level III). This has the strong effect on other quadrants,
which means that the rule of law, government effectiveness, and regulatory quality
influences political stability, which in turn affects the ease of paying taxes, resolving
insolvency, and starting business. The independent factors have low dependence and high
driving power form the base of hierarchy which is in level IV. These enablers include
regulatory quality, government effectiveness, and rule of law. Thus, these enablers should
be handled strategically for development of an entrepreneurial ecosystem.
Government effectiveness leads to the appropriate implementation of the rule of law,
thereby, resolving social conflict and reducing the coordination problems. It leads to
greater efficacy in government actions, removes structural barriers to the proper
implementation of policies and builds and nurtures the entrepreneurial ecosystem.
Rule of law ensures the effective functioning of the government by establishing
networks of responsibility and accountability and leads to proper contract enforcement.
It also acts as a guide for reducing formalisation in terms of future transaction costs
and litigation. Therefore, it helps in starting a business, paying taxes and resolving
insolvency.
Regulatory quality helps to reinforce credibility through the proper implementation of
policies. It helps to generate responsible and responsive government. It reduces costs and
leads to faster incorporation process of new business, and also spreads sound practices
that help in ease of paying taxes.
Political stability acts as a linkage factor between the dependent and independent
factor, indicating that regulatory quality, government effectiveness, and rule of law
influences political stability, which in turn affects ease of resolving involving insolvency
and ease of starting a business. Political stability helps in formulating long-term policies
396 S. Singh et al.

which lead to cost-effective and quick incorporation process of new business. It helps in
formulating long-term policies which ease the procedure for resolving insolvency. It also
helps in formulating long-term plans for the country and formulates policies which ease
the procedure for resolving insolvency. Ease of resolving insolvency will provide
certainty regarding the future course of action and will give a lesser burden to the
taxpayer.
The level IV factors, i.e., government effectiveness, the rule of law and regulatory
quality need to be strengthened first, in order to build the entrepreneurial ecosystem in
the country. The rule of law has favourable impact on firms’ innovation (Parameswar
et al., 2018; Shrotriya et al., 2018) such as technological innovation management
innovation, process innovation, product innovation, and such laws as intellectual property
rights can help to protect innovation.
This study offers important implications for policymakers, practitioners and
researchers. For the policymakers and practitioners, it highlights the institutional factors
with driving and dependence qualities that need attention and greater resource
deployment for them to have a positive impact on the entrepreneurial ecosystem. These
insights could help the policymakers with policy design and implementation.
Strengthening the entrepreneurial ecosystem by transforming the institutions may
take a long time. Till then, practitioners may use the identified framework for the
evaluation of the ecosystem to set-up enterprise, carry out day to day operations,
and resolve other issues. A good understanding of the entrepreneurial ecosystem in
institutional contexts might help the practitioners to identify their strengths and
weaknesses. Therefore, managers can capitalise their strength and overcome weakness in
the provided institutional context. The venture capitalist can also focus on the countries
for investment in start-ups, where the regulatory quality, rule of law, and government
effectiveness support entrepreneurship development. This study may help managers in
prioritising their activities by focusing on driving forces which impact dependent factors.
From a research perspective, this framework provides a theoretical foundation of how
and why different institutional factors can impact each other and can have an impact on
the entrepreneurial ecosystem of a country. The study can help young researchers and
students to appreciate the interdependencies affecting ‘entrepreneurial ecosystem’ and the
usefulness of TISM as one of the exploratory methods to interpret the unexplained
linkages.

6 Conclusion

This paper builds a model by using two methodologies namely TISM and MIC-MAC.
The novelty of this research lies in identifying different institutional enablers which help
in the growth of entrepreneurial ecosystem and then classification of these identified
factors into four hierarchical levels based on their driving and dependence power.
By reviewing the existing literature on institutions and entrepreneurial ecosystem,
different factors and the relationship among them have been identified. The outcome of
this study can help policymakers to know the crucial factors required for the development
of entrepreneurial ecosystem along with helping researchers and policymakers. Further
research could focus on other elements which affect the entrepreneurial ecosystem, such
as the availability of infrastructure, and quality of education. Statistical analysis could
also be performed to validate the model with the help of data collected from researchers,
 A framework for linking entrepreneurial ecosystem with institutional factors 397

industry experts, and policymakers. Furthermore, fuzzy MICMAC methodology can be

implemented, and the result could be interpreted in the above-mentioned context.

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 A framework for linking entrepreneurial ecosystem with institutional factors 403

Appendices

Appendix I: Institutional entrepreneurial ecosystem factor’s classification

Dimension code Factors Level
F1 Regulatory quality I
F2 Rule of law I
F3 Political stability II
F4 Government effectiveness I
F5 Ease of resolving insolvency III
F6 Ease of paying taxes IV
F7 Ease of starting business IV

Appendix II: Factor’s relationship and their interpretation

Factor Interpretation Reference
PS – EoSB Stability helps in formulating long term policies Haidar (2012), Klapper et al.
which leads to cheap and fast incorporation (2011)
process of new business
PS – EoPT Helps in formulating long-term policies which Feng (1997), Haidar (2012)
eases the procedure for resolving insolvency
PS – EoRI Helps in formulating long-term plans for the Feng (1997)
country and formulates policies which eases the
procedure for resolving insolvency
RoL – PS Eliminates diverse high risk outcomes by limiting Alexander (2002), Santiso
discretionary power (2001)
RoL – GE Ensures effective functioning of the government Donnell (2014), Adserà et al.
by establishing networks of responsibility and (2003)
accountability
RoL – RQ Leads to proper contract enforcement Jones (1958), Fukuyama
(2013)
RoL – EoSB Acts as a guide for reducing formalisation in Davis et al. (2012), Berg and
terms of future transaction costs and litigation Cazes (2007)
RoL – EoPT Acts as a guide for appropriate conduct and help Davis et al. (2012)
reduce time, cost and procedures of paying taxes
RoL – EoRI Acts as a guide for appropriate conduct and help Davis et al. (2012)
reduce time, cost and increase recovery rate of
resolving insolvency
GE – PS Resolves coordination problem and reduces social Alexander (2002), Santiso
conflict (2001), Adserà et al. (2003)
GE – RoL Leads to proper implementation of rule Méon and Sekkat (2005),
Adserà et al. (2003)
GE – RQ Leads to greater efficacy in government action Isham et al. (1997)
GE – EoSB Helps to build environments that nurture and Carter and Bélanger (2005),
sustain entrepreneurship Isenberg (2010)
 404 S. Singh et al.

Appendix II: Factor’s relationship and their interpretation (continued)

Factor Interpretation Reference
GE – EoPT Improves the ability and effectiveness of the tax Klapper et al. (2010)
payment system by the way of implementing new
reforms
GE – EoRI Remove structural barriers such as such as Klapper et al. (2010),
onerous bankruptcy legislation Porta et al. (1997)
RQ – PS Help reinforce the credibility Torgler and Schneider (2009),
Das et al. (2003)
RQ – RoL It will lead to proper implementation of policies Jones (1958), Fukuyama
(2013)
RQ – GE Helps generate responsible and responsive Rothstein and Teorell (2008),
government Isham et al. (1997)
RQ – EoSB Reduces cost and leads to faster incorporation Klapper et al. (2011)
process of new business
RQ – EoPT Leads to spread of sound practices which helps in Das et al. (2003)
ease of paying taxes
RQ – EoRI Formulation and implementation of proper Porta et al. (1997)
bankruptcy legislations
EoRI – EoSB Provides certainty regarding future course of Daude and Stein (2007),
action Das et al. (2003)
EoRI – EoPT Effective EoRI will provide less burden to tax Das et al. (2003)
payer

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