**5. The role of institutions in fostering entrepreneurship**

Interactions between institutions and the business environment are also fundamental for economic and social development. The difficulties that emerge in these partnerships might inhibit entrepreneurs' desire to invest, which would be detrimental to both parties because it decreases the productivity of the businesses and consequently reduces the level of public sector funding in these circumstances, new institutional

#### *Entrepreneurship in Emerging Economies: The Role of Innovation and Institutions DOI: http://dx.doi.org/10.5772/intechopen.109893*

strategies are required to address the interchange issues that stimulate economic growth and significantly affect the nature of economic development. A phenomenon that we can refer to as Institutional Economics is produced as a consequence of the role that institutions play in the development of entrepreneurship [25]. This phenomenon suggests a particular method for examining theoretical and real-world economic issues in relation to social and institutional developments. With this method, the connections between economic and non-economic processes can be better understood [26]. The functioning of phenomena including economic agent behavior, supply and demand laws, market mechanism activity, and transaction management is based on widely accepted institutions [27]. These institutions' principal purpose is to establish standards or basic rules that control behavior and influence how entrepreneurs interact with one another in the entrepreneurial ecosystem. Institutions are essentially the civic or organizational norms that facilitate interaction between entrepreneurs by helping them establish reasonable expectations that one can have toward the other.

At the same time, plays the role of controlled models of human interactions, and the term *institution* refers to both formal rules and their application characteristics as well as informal limitations. This idea also outlines a certain way that social and political connections are organized in accordance with the laws that have been developed in various domains of endeavor. Thus, it is possible to distinguish between two notions of institutions: the first refers to the idea of an institution as a set of policies guiding people's behavior and the second is the idea of an institution as a distinct entity [28]. In some circumstances, it is reasonably obvious to distinguish between institutions as a set of regulations and institutions as actual entities or organizations. This category includes businesses, labor unions, and political parties. Guidelines for how these entities should be represented are on the one hand, and the organizations that have been designated as such are on the other. The institutions that govern transactions specify whose preferences matter and how these preferences will be taken into account during the process of production, distribution, and consumption is actually the rules that govern economic interactions and relationships. By creating a solid framework for how people interact with the economy, institutions serve as a primary tool for increasing human behavior predictability and reducing uncertainty. As a result, the term institution can be defined as a system of laws that can decrease the uncertainty that is frequently linked to human conduct while initiating, launching, developing, and completing transactions [29, 30]. The analysis that tracks the linkages with various types of institutions is referred to as "the function of institutions in the impact that entrepreneurship has on economic development" [31].

The requirement for entrepreneurial education is the first aspect that stands out when considering ties with academic and research institutes. Modern civilization places higher demands on the educational system, resulting in a social structure that did not exist before. These changes are primarily brought about by the substantial developments of the last few decades and the demand for proactive, independent individuals who can integrate into society and participate in its ongoing development. In this context, educational institutions at all levels must adopt particular twenty-first-century tools and methods to provide the ideal educational environment and foster creativity, innovation, and the capacity for a global perspective [32]. The capacity to develop leadership and interpersonal skills through an entrepreneurial mindset is a significant asset that is gaining a growing amount of attention. The entrepreneurial spirit and innovation emerge in new approaches to learning, living, and working. For the incorporation of entrepreneurship and innovation [33], transdisciplinary approaches, and interactive teaching methods in education, different

models, architectures, and standards are expected. Undoubtedly, current systems must be evaluated, and the worldwide educational system needs to be fundamentally reformed. In order to provide the economic environment with a workforce that is educated and capable of fostering economic development, changes in the educational system are required at all levels [34]. These improvements should focus on the process of continuous learning as well as the essential connections and interactions between levels (secondary, high school, higher, and continuing education). On the other hand, time is critical to bear in mind this relationship's vulnerability, which is the formation of institutional commitment. Institutions of higher learning must alter their curricula to support the development of twenty-first-century competencies [35]. In this regard, institutional commitment is essential, along with clear strategies and realistic action plans. However, at moment, there is no concrete application of any discussions relating to entrepreneurship education in terms that students may use. Academic institutions must turn the debates' conclusions into practice, which involves providing students and instructors with the appropriate motivation and support. At this time, governments everywhere must act to narrow the widening competency gaps. At the highest political levels, there must be a consistent and unequivocal commitment to this. Both the strategic framework within which schools and universities can work to implement programs and activities inside their institutions, as well as a clear signal of support for entrepreneurship, should be conveyed through policies. Better action and coordination are required at the national, regional, and local levels to achieve objectives [36]. A key component of developing policies and implementing programs is including stakeholders from academia, industry, the NGO sector, and institutions.

#### **5.1 Learning organizations and innovation systems**

In a knowledge-based economy, companies search for connections to foster interactive learning among companies and outside partners and networks search for methods to offer complementary assets. Through these connections, businesses can access cutting-edge research findings, obtain vital technology components, reduce the costs and risks of innovation, and pool resources for production, marketing, and distribution [37]. Companies choose the tasks they will carry out on their own, collaboratively with other enterprises, with universities or research organizations, and with government support as they create new goods and processes. Thus, innovation is the outcome of various interactions between institutions and actors, which collectively make up an innovation system [38]. The interactions within these systems have an impact on how innovatively successful businesses perform, which in turn has an impact on the economy. These innovation systems are made up of the flows and relationships between emerging industry, government, and academia, as well as the advancement of science and technology. Therefore, one factor influencing prosperity is the system's ability for knowledge distribution, or its capacity to guarantee innovators' timely access to relevant knowledge resources.

In a knowledge-based economy, knowledge serves as the primary resource. The level of knowledge and information incorporation in economic activity is now so high that it results in rather significant structural and qualitative changes in how the economy functions, altering the foundation of competitive advantage. The value of knowledge has increased for all economic system participants as a result of the growing competitiveness of the global knowledge economy and our willingness to disseminate knowledge [39]. This has significant ramifications for company goals, governmental policies, as well as the institutions and processes in place to control economic behaviors.

*Entrepreneurship in Emerging Economies: The Role of Innovation and Institutions DOI: http://dx.doi.org/10.5772/intechopen.109893*

A system of consumption and production based on intellectual capital is known as the new economy. It often makes up a sizable portion of all economic activity in developed nations. In the knowledge-based economy, intangible assets, such as the value of employees' knowledge or intellectual capital, can account for a sizeable portion of a company's worth [40]. However, businesses are not authorized to incorporate these assets on their balance sheets in accordance with generally accepted accounting policies. The global economy has transitioned to a knowledge-based economy in the digital era, bringing with it the best practices from each country's economic growth [41]. Additionally, knowledge-based development elements produce an interconnected global economy where information sources, such as human expertise, are critical drivers of economic growth and are regarded as significant economic assets.

#### **6. Conclusions**

Economic development benefits remarkably from entrepreneurship. The approach considered to be the most important is innovation, which includes creating new goods and procedures, finding untapped sources of supply, coming up with creative ways to manage a business, as well as leveraging on new markets. The main contribution of analyses in innovation-driven countries is a broader knowledge of the causes and effects of innovation in developing countries, as well as of the institutions and policies that promote or inhibit innovation. Three important conclusions that may be drawn from this chapter are as follows:


• Finally, the institutional and political environment does have a significant impact on how innovative an entrepreneur is. This aspect explains why entrepreneurs with remarkably comparable characteristics may exhibit divergent outcomes in terms of their innovative performance. To encourage innovation, a solid organizational framework and an efficient innovation infrastructure are needed.

The necessity for both direct and indirect government support for innovation is essential for sustainable development in the twenty-first-century entrepreneurial ecosystem. The business environment, grants for research and development, risk and venture capital assurance, maximizing the potential of migrant workers and the diaspora, enhancing technical and managerial education, expanding infrastructure, and active public partnerships are just a few illustrations of the several different manners this can be accomplished. By fostering competition, an adverse climate can often encourage innovative behavior, and entrepreneurs themselves can serve as catalysts for political and institutional change.

Given the current and upcoming challenges facing global development, entrepreneurial innovation is going to become increasingly important. These include ongoing socioeconomic inequalities as well as the rising susceptibility of nations to outside shocks such as financial crises, calamities, and threats like environmental issues.

Innovative entrepreneurship is fundamental to overcoming these obstacles and seizing the opportunities they offer, and the idea itself ought to be expanded. In particular, increasing roles for social entrepreneurship, public entrepreneurship, institutional entrepreneurship, and even sovereign non-state entrepreneurship are examined.

To better comprehend the innovative contributions of various business types and forms of entrepreneurship in countries with various levels of development, it is important to comprehend the current challenges:


The current chapter has improved our understanding of how different forms of entrepreneurship prosper in different environments and at different stages of development. However, we definitely must conduct additional research and analysis and look for the most appropriate patterns for different configurations and developmental stages.

It is still difficult to create institutions, groups, and regulations that successfully encourage both invention and entrepreneurship. The fact that developing nations usually lack the capacity and resources to conduct significant, evidence-based research makes this process increasingly challenging. Future research will concentrate on how to react to the junction of the fields of entrepreneurship, development economics, and innovation studies in order to support this argument.

Several dynamic influences, such technology advancement, economic fluctuations, or demographic shifts, have reshaped societies all over the world and provided new challenges as well as opportunities to business ecosystems. Governments, public and private organizations, as well as economic actors, are gradually becoming more conscious of the significance of entrepreneurship, which is seen as a multifaceted

#### *Entrepreneurship in Emerging Economies: The Role of Innovation and Institutions DOI: http://dx.doi.org/10.5772/intechopen.109893*

phenomenon and one of the leading drivers of economic development on all stages, from the local to the global level.

Scientific research on entrepreneurship and economic development became more prominent in the second decade of the twenty-first century, alongside technological innovation. Both concepts have established themselves as significant research topics for economists and researchers around the world who, in the context of globalization, have worked to develop new indicators that could quantify the impacts of the two beliefs. Additionally, there is increasing interest in the nexus between entrepreneurship and economic development as a method of explaining changes in economic performance throughout time. Entrepreneurship, a common component of human activity, is critical to the growth of the economy. Today, entrepreneurship is widely recognized as an important element of economic progress on a global scale by professionals and academics everywhere.

However, entrepreneurship has both positive and negative effects on economic growth. Economic development and entrepreneurship are now closely linked in today's modern global economy, and economic progress can emerge from the creation of a critical mass of effective policies and initiatives. This transition requires the implementation of an adapted strategy and governance, which is particularly difficult for large corporations. These conglomerates will be under pressure to advocate for the establishment of a separate sector for artificial intelligence and spin-offs. To avoid the imbalance between businesses that can apply AI compared to those that cannot, it is necessary to take into consideration and leverage the fact that the overwhelming majority of AI investors are actually the leading players in the technology economy.

A significant increase in productivity results from the economic utilization of artificial intelligence. As a technical innovation, it contributes to both the inputs—consumer goods or services—and the outputs—internal processes like management, logistics, or customer service. A substantial loss of competitiveness could result from the inability to adapt to these technologies. However, it is important to consider the risks associated with economic dependency, sovereignty, and the potential for increased inequality. It is imperative to remove the possibility of turning businesses into consumers of solutions created offshore given the current structure of the digital economy. The platforming and value-capturing effects that are now characteristic of the digital economy could then be further improved by the development of artificial intelligence. Few actors in the economic arena have the data and computational resources that this development requires. The ability to interpret these technologies' significance and contents also need to be preserved due to their ability to be used as decision-supporting or even decision-making tools. This is important because the dissemination of artificial intelligence-derived technologies has the potential to cause significant social and territorial inequality, particularly because of the concentration of wealth in some areas.

The global business environment is evolving due to the digital revolution, which has changed methods and approaches for creating economic ecosystems as well as processes and systems. To be competitive in the context of global competitiveness, companies worldwide must take advantage of this new environment. The establishment of start-ups and the transformation of existing businesses through the development of new digital technologies are generally understood as examples of the digitization of entrepreneurship. These activities are perceived as a pillar of innovation, prosperity, and employment generation in many economies. As we observe a variety of global initiatives aimed at stimulating the acceleration of entrepreneurial activity, a holistic and integrated approach is required. A nation's capacity for digital entrepreneurship mainly relies on digital entrepreneurial behavior, culture, and strategies, as well as an

innovation ecosystem where governments, industries, businesses, educational institutions, and NGOs operate around each other. Entrepreneurship thrives in ecosystems where all stakeholders take an active role. Education and practice in particular should be more integrated to guarantee that future abilities meet employment prospects. Students should be given the chance to experience and practice entrepreneurship education, and the academic environment should be encouraged to connect with the solid business community to incorporate these abilities into the learning process. It is important to raise awareness and increase access to good practice models in order to motivate youngsters to reach their full potential. In this regard, it is essential to broaden partnerships among interested parties.

To ensure sustainable economic development, the strategy's actions must be focused on: fostering cooperation and relationships between institutions and the entrepreneurial ecosystem; establishing business-friendly governance by developing a dialog strategy between the factors involved (public institutions and the business environment); strengthening entrepreneurial capacities; and supporting, encouraging, and promoting local businesses by training providers. The institutions' purpose is to improve the business environment by strengthening the potential of SMEs and their role in economic growth, building confidence between the business community and the government, and overall fostering a more supportive business environment.

The qualities of the entrepreneurial ecosystem that have been emphasized in this chapter's examination of the function of institutions lead us to assume that this relationship is significant because it is a mechanism through which various participants from the public sector, the business community, and non-governmental sector cooperate to enhance the conditions for economic growth and to generate employment. In order to improve the quality of life for everyone in the community, dynamic entrepreneurial culture is built, maintained, and tangible resources are generated for the community and the business environment. The amount of time and money required to establish a strategy and a public-private partnership toward economic growth that is under the control of the community largely depends on the current condition in addition to the expertise and competence of the actors and institutions involved.

Underestimating the institutional framework is the cause of the inadequate performance of businesses in the sector since institutions' primary purpose in society is to eliminate uncertainty by creating a stable foundation for human interactions. Therefore, the slow growth of the entrepreneurial ecosystem has been primarily caused by the absence of sufficient forms of social and political relationship organization. In order to obtain an agreement on these concerns, it is fundamental that the interested parties, the entrepreneurs, are thoroughly consulted in a participatory process when formulating policies for the expansion of entrepreneurship as well as when creating institutions. In contrast to when these structures are imposed by external authorities, the establishment of local institutions that are based on the needs of the economic environment and that would benefit from improved collaboration with the locals can lead to significantly greater performances and reduced costs.

*Entrepreneurship in Emerging Economies: The Role of Innovation and Institutions DOI: http://dx.doi.org/10.5772/intechopen.109893*
