Developing a framework for entrepreneurship ecosystem for developing countries: The application of institutional theory

Bamfo, Bylon Abeeku; Asiedu-Appiah, Felicity; Ameza-Xemalordzo, Enya Article Developing a framework for entrepreneurship ecosystem for developing countries: The application of institutional theory Cogent Business & Management Provided in Cooperation with: Taylor & Francis Group Suggested Citation: Bamfo, Bylon Abeeku; Asiedu-Appiah, Felicity; Ameza-Xemalordzo, Enya (2023) : Developing a framework for entrepreneurship ecosystem for developing countries: The application of institutional theory, Cogent Business & Management, ISSN 2331-1975, Taylor & Francis, Abingdon, Vol. 10, Iss. 2, pp. 1-19, https://doi.org/10.1080/23311975.2023.2195967 This Version is available at: https://hdl.handle.net/10419/294362 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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Published by Informa UK Limited, trading as Taylor & Francis Group. Published online: 26 Jun 2023. Submit your article to this journal Article views: 1412 View related articles View Crossmark data Citing articles: 2 View citing articles MANAGEMENT | RESEARCH ARTICLE Developing a framework for entrepreneurship ecosystem for developing countries: The application of institutional theory Bylon Abeeku Bamfo 1 *, Felicity Asiedu-Appiah 2 and Enya Ameza-Xemalordzo 1 Abstract: This is a qualitative study, which aims at developing a framework for entrepreneurship ecosystem for Ghana and other developing countries through the lens or with the application of institutional theory. In all, 61 owner managers were sampled for the study. In addition, 19 institutions were selected for the study. These were institutions that the researchers identified as having activities that were geared towards entrepreneurship capacity building and were willing to participate in the study. The sampling technique adopted was purposive, and the data collection methods were face-to-face interview with respondents and focus groups. The study revealed that there is a need for continuous building of the capacities of owner managers as a way of encouraging them to continuously push for innovative ideas that can be translated into acceptable products. The capacity-building responsibility is not the exclusive preserve of the government but all other institutions that have a stake in entrepreneurship development. However, governments of the developing world need to play a leading role in coordinating and regulating the activities of other stakeholders or institutions that operate at intertwined layers of regulative, normative, and cognitive pillars of an ecosystem. Subjects: Production, Operations & Information Management; International Business; Marketing Bylon Abeeku Bamfo ABOUT THE AUTHOR Bylon Abeeku Bamfo is an Associate Professor of Marketing and Entrepreneurship in the Department of Marketing and Corporate strategy of KNUST School of Business, Kumasi, Ghana. His research areas include advertising, consumer behaviour, social marketing, entrepreneurship, and small business management, among others. Bamfo et al., Cogent Business & Management (2023), 10: 2195967 https://doi.org/10.1080/23311975.2023.2195967 Page 1 of 19 Received: 25 May 2021 Accepted: 21 March 2023 *Corresponding author: Bylon Abeeku, Bamfo, KNUST School of Business Department of Marketing and Corporate Strategy, Kumasi, Ghana E-mail: [email protected] Reviewing editor: Pablo Ruiz, Universidad de CastillaLa Mancha, Spain Additional information is available at the end of the article © 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent. Keywords: entrepreneurship; capacity; development; institutions; ecosystem 1. Introduction The importance of entrepreneurship to the development of economies of both developed and developing countries has widely been recognised by practitioners and researchers (Kayanula & Quartey, 2000). It has been argued that the development of entrepreneurship and small businesses has contributed to the assumption of economic leadership of most countries in a wide range of industries (Stokes, 1995). Entrepreneurial capitalism is seen as a central mechanism in promoting efficiency, productivity, economic development, and international competitiveness of enterprises (Acquaah, 2005). Entrepreneurial stakeholders have recognised the importance of entrepreneurship in contributing to the employment and gross domestic product (GDP) of countries, and developing countries in particular. The United Bank for Africa (UBA) Growing Business Programme studies shows that about 90% of all businesses in Africa fall under the SME sector, and the sector’s contribution to GDP and employment in most African countries is estimated to be about 40% and 70%. Small-scale enterprises make significant contributions to income and employment and have the potential for self-sustaining growth. Thus, the developmental agenda of developing countries hinges, to a very large extent, on the effective development of entrepreneurship and/or the small business sector. Many studies have considered the role of entrepreneurship in the development of developing economies. Besides, some studies, particularly that of Cao and Shi (2021), on entrepreneurship ecosystem concentrated on some differences between developed and developing economies using factors such as resource scarcities, structural gaps, and institutional voids and was done at the systematic literature review level. However, little attention has been paid to the empirical development of a framework for the entrepreneurship ecosystem for developing countries. It must be emphasized that there are other relevant parties that affect entrepreneurial success (Isenberg 201). However, in developing this framework, the current study empirically focuses on the contributions of four major enterprisesupport institutions of higher educational institutions, international organisations, financial institutions, and government institutions. This is explained by the fact that, they feature prominently in the entrepreneurial development process. The role of entrepreneurs and owner managers was also explored in empirically developing the framework for the entrepreneurship ecosystem. This study is further uniquely underpinned by the application of institutional theory. 2. Literature review Institutional theory has become popular with writers and researchers as they are increasingly utilising the theory as the lens for many areas of research including entrepreneurship. Entrepreneurial firms and small businesses in developing countries face rapid and dramatic shifts in the institutional environment. These shifts present owner managers with challenges as they seek to grow and develop their ventures (Bruton et al., 2010). The introduction of institutional theory in this study is very important because it provides an overarching theoretical lens through which organisational strategies (Scott, 1994) of enterprise-support institutions and organisational responses of entrepreneurial firms can be illuminated. Thus, institutional theory serves as a guide for explaining the behaviour of small businesses as well as enterprise-support organisations of the government, financial institutions, higher educational institutions, and international organisations in the developing world. 2.1. Institutions defined It is important to define the fundamental constituents of the theory. This section thus explores the meaning of “institutions” with reference to institutional theory. This understanding will help in finding out the underpinning elements of institutional theory. There is a debate in the literature with regard to the distinction between institutions and organisations. It has been established that there is not a single universally acceptable or agreed definition of the concept of “institution” (Scott, 2002). In other words, the term institutions may mean different things in different contexts, Bamfo et al., Cogent Business & Management (2023), 10: 2195967 https://doi.org/10.1080/23311975.2023.2195967 Page 2 of 19 and therefore, it is very difficult to pin it down to one unarguable definition. It is therefore, not uncommon to have different definitions and interpretations of the term “institutions” (Hoffman, 1999; Japperson, 1991; Scott, 2002). Institutions have been defined as “rules, norms, and beliefs that describe reality for organisations, explaining what is and is not, what can be acted upon and what cannot” (Hoffman, 1999, p. 351). They are taken-for granted, culturally understandings, which specify and justify social arrangements and behaviours, both formal and informal. Therefore, institutions can be viewed as performance scripts, which provide “stable design for chronically repeated activity sequences,” deviations from which sanctions are imposed (Japperson, 1991, p. 145). According to the key premises of institutional theory, institutions are social structures that have attained a high degree of resilience and they include cultural-cognitive, normative, and regulative components (Scott, 2007). These elements together with related activities and other resources bring about stability and make social life meaningful. Even though this definition emphasises stability, some researchers believe that institutions are subject to change processes, both incremental and discontinuous (Scott, 2002). Broadly speaking, the term has been used to refer to the formal set of rules, ex-ante agreements, less formal shared interaction sequences, and taken-for-granted assumptions, which organisations as well as individuals are supposed to follow (Bonckeck & Shepsle, 1996; Scott, 2007). These take their root from rules, such as regulatory structures, government agencies, laws, courts, professions, scripts, and practices in the societal and cultural domains that exert conformance pressure (DiMaggio & Powell, 1991). Thus, North (1991) argues that institutions are humanly devised constraints that structure political, economic, and social interaction. They comprise both informal constraints, such as values, norms, sanctions, taboos, customs, traditions, and codes of conduct and formal rules, such as constitutions, laws, economic rules, property rights, and contracts. Examples of informal constraints in the developing world with respect to entrepreneurship development are customs and traditions. The customs and traditions require the entrepreneur or the owner manager to employ extended family members first, even if their skills and/or competences are not enough to perform the job. As an example of formal constraints, the realisation is that the laws, economic rules, property rights, and contracts favour large businesses at the expense of small businesses. Given this emphasis on regulative and normative aspects within the extant literature, other researchers have looked at “institutions” from another perspective. For example, DiMaggio and Powell (1991) bring their neo-institutionalism to bear on the explanation of institutions. The new institutionalism organisational theory rejects the rational-actor model and is interested in institutions as independent variables, a turn toward cognitive and cultural explanations. The discussion above of institutions from different perspectives suggests that they create expectations that determine the appropriate actions for organisations and also form the reasons by which laws, rules, and taken-for-granted behavioural expectations appear natural and abiding. Therefore, institutions define in an objective sense what is the appropriate behaviour of organisations and thus any behaviour that is contrary to what has been defined by these institutions is considered inappropriate or unacceptable. It has thus been argued that the institutions set the rules of the game and/or define the way the game is played, whereas the organisations are the players that must play in accordance with the set rules (DiMaggio & Powell, 1983; Scott, 2007). In this study, the institutions are the major enterprise-support organisations, mainly the government agencies, financial institutions, higher educational institutions, and international organisations. These institutions determine the regulative, normative, and cognitive infrastructures for small businesses in developing countries. These institutions set rules for small businesses and small businesses are thus expected to play according to their rules. The building of Bamfo et al., Cogent Business & Management (2023), 10: 2195967 https://doi.org/10.1080/23311975.2023.2195967 Page 3 of 19 entrepreneurship capacity is thus dependent on the conformance of small businesses to the rules of these institutions. The conformance is also dependent on how flexible these rules are and the readiness of the entrepreneurs to comply. This calls for collaborative efforts on the part of the institutions and entrepreneurs. At the cognitive level, the development and growth of small businesses, and hence the capacity for entrepreneurship is highly linked to the training and education offerings of these enterprises support institutions. The three pillars of institutional theory and how they apply to the current research are discussed further. 2.2. The pillars of institutional theory and their application in entrepreneurship ecosystem Institutional theory acknowledges the importance of economic forces and technical imperatives in shaping social and organizational systems. It also seeks to examine the behaviours and preferences of organisations, individuals, and other outside forces (Bruton et al., 2010; Dacin et al., 2007; Delmar & Shane, 2004; Tolbert et al., 2011). Institutional theory focuses on the regulatory, social, and cultural influences that bring about survival and legitimacy of an organisation rather than concentrating solely on efficiency seeking behaviour (Scott, 2002). The theory emphasizes the environmental factors experienced by an organisation, such as the norms of society, rules, and requirements, which organisations are expected to conform to. This helps in creating legitimacy and support for such organizations (Bruton et al., 2010; Carney and Scott, 2001; Tolbert et al., 2011; Dacin et al., 2007). Institutional theory depends to a very large extent on social constructs to help in defining the structure and processes of organizations. The distinctive and the most basic characteristic of institutional theory is conformity. This conformity is what is used in determining the legitimacy of organizations. The concept of conformity seeks the establishment of “rational myths” in which it is just “rational” that there is the incorporation of certain norms of society, rules, and requirements into missions and goals of organizations (Manolova et al., 2008; Welter, 2011). These debates bring to the fore the important role that entrepreneurs and small businesses need to play in developing societies. The Ghanaian society, for example, requires entrepreneurs to contribute, among other things, to the creation of employment for thousands of unemployed people and thus reduce unemployment and poverty. This is very useful in creating legitimacy and support for small businesses. However, small businesses cannot gain the full support of society if their contribution to the growth and development of the economy is infinitesimal. There is a need for building entrepreneurship capacities to propel entrepreneurs and/or owner managers to contribute more to national development. This is what the current study seeks to investigate and to recommend a framework for the building of entrepreneurship capacity with the application of institutional theory. 2.3. The regulative pillar The regulative pillar takes its roots from the studies in economics and thus represents a rational actor model of behaviour, based on sanctions and conformity. By means of the rules of the game, monitoring and enforcement, institutions guide the behaviour (North, 1990; Scott, 2001; Tolbert et al., 2011; Dacin et al., 2007). Thus, Scott (1994) argues that the regulatory dimension of the institutional profile consists of laws, regulations, rules, and government policies in a particular national environment, which promote certain types of behaviour and restrict others. In other words, the regulatory pillar of an institutional system works to give support, incentive, and sanction to organizations and individuals from authoritative bodies, such as a government, which regulates the actions of individuals and organizations (Brandl & Bullinger, 2009; Hinnings & Tolbert, 2008). The regulative processes consist of rule-setting, monitoring, and sanctioning activities. The regulative processes involve the capacity to establish rules, inspect, or review others’ conformity to them, and as necessary, manipulate sanctions-reward and punishments-in an attempt to influence future behaviour. These rules and regulations stem primarily from legislation by Bamfo et al., Cogent Business & Management (2023), 10: 2195967 https://doi.org/10.1080/23311975.2023.2195967 Page 4 of 19 government and industrial agreements and standards. These legislative instruments provide guidelines for entrepreneurial organisations, particularly new ones. This more often than not results in organisations and individuals complying with laws or may require a reaction if there is a lack of regulation in the region of the entrepreneurial firm (Bruton et al., 2010; North, 1990). As stated earlier, the study investigates four major enterprise-support institutions. The institutions identified are governmental institutions, financial institutions, higher educational institutions, and international organisations. These institutions come up with policies and rules that control the activities of small businesses in developing countries. These policies and rules are important in entrepreneurship research because they serve as a guide for the behaviour of entrepreneurs and small businesses (Brandl & Bullinger, 2009; Hinnings & Tolbert, 2008). In order to ensure effective entrepreneurship capacity building, therefore, small businesses and entrepreneurs should comply with the laws of government agencies as well as the rules and regulations of the other key enterprise-support organisations (Bruton et al., 2010). It must be, however, stated that these rules and regulations sometimes not easily complied with as some of them are made without taking into account the needs and the capacity of these small businesses to comply. In other words, policies, rules, and regulations are not necessarily situated in the current reality of small businesses. Some of these rules and regulations are made by these institutions with reference to global business circumstance (Abor & Biekpe, 2007; Kayanula & Quartey, 2000). Therefore, this study offers a useful contribution to knowledge through an in-depth exploration of the needs of small businesses as well as offerings of enterprise-support institutions in portraying a holistic understanding of the macro-level dimensions of capacity-building activities for enterprise development in Ghana. 2.4. The normative pillar The normative pillar represents models of organisational and individual behaviour based on obligatory dimensions of social, professional, and organisational interaction. By defining what is appropriate and/or expected in various social and commercial situations, institutions guide behaviour (Bruton et al., 2010). Normative systems are typically comprised of values and norms that further establish consciously followed ground rules, which people must conform to. It is also often called culture. Normative systems define goals or objectives and also designate the appropriate ways to pursue them (Scott, 2007). Thus, normative institutions exert strong influence because of their social obligation to comply, rooted in social necessity or what organisations and individuals should be doing (March & Olsen, 1989). It has also been argued that some societies have norms that are geared toward the facilitation and financing of entrepreneurship, while some other societies do not encourage it by making it difficult, often unwittingly (Baumol et al., 2009). The relevance of this pillar to the current study is that entrepreneurs in the developing world, in seeking to build their capacity for growth and development, must take into consideration the societal and/or cultural implications of their actions. The goals and objectives of these entrepreneurs must be cultural and societal driven (Scott, 2007). It is only by doing this that the norms of the society will be geared towards encouraging and facilitating entrepreneurship (Baumol et al., 2009). Wealth generation and employment provision, particularly in certain localities, are considered to be legitimate socio-economic functions of new enterprises and small businesses in developing countries. Therefore, normative considerations include the attitudes, norms, and cultural values towards entrepreneurship, which underpin the philosophy and approach behind setting up enterprise-support programmes by such institutions, such as government agencies, financial institutions, higher education institutions, and international institutions. 2.4.1. The cognitive pillar The last pillar is the cognitive pillar. It is derived from the recent cognitive turn in social science (DiMaggio & Powell, 1991). It represents models of individual behaviour based on subjective and constructed rules and meanings that place limits on appropriate beliefs and actions. The cognitive elements of institutions are the rules that constitute the nature of reality and the frames through Bamfo et al., Cogent Business & Management (2023), 10: 2195967 https://doi.org/10.1080/23311975.2023.2195967 Page 5 of 19 which meaning is made. Cognitive structures affect the cognitive programs, i.e., schemata, frames, and inferential sets, which people use when selecting and interpreting information (Markus & Zajonc, 1985). Cognitive pillars often operate more at the individual level in terms of culture and language and other taken-for-grantedness and preconscious behaviour that people rarely think about (DiMaggio & Powell, 1991; Scott, 2007). The importance of this pillar to entrepreneurship research is explained in terms of how societies accept entrepreneurs, inculcate values, and even create a cultural environment whereby entrepreneurship is accepted and encouraged (Harrison, 2008). This is very closely linked to normative pillars, but the emphasis is more on the knowledge base and learning of entrepreneurs and owner managers and making sense of such knowledge for synthesising it for effective enterprise development. On the basis of the above discussion, the research questions guiding the current study are as follows: 1. What are the principal actors in the entrepreneurship development agenda in the developing world? 2. What is the strategic role of government in the entrepreneurship programme of developing countries? How do stakeholders on the entrepreneurial development agenda operate at intertwined layers of regulative, normative, and cognitive pillars of an ecosystem? 3. Research methods The study aims at developing a framework for entrepreneurship ecosystem for developing countries with the application of institutional theory. Ghana is chosen as the study area. The two major cities of Accra and Kumasi were the focus areas of the study. These two cities were selected by reason of the fact that they are the two major cities of Ghana and majority of owner managers are located there. Besides, Accra and Kumasi represent the southern and northern sectors of Ghana, respectively, thus eliciting responses across the country. The population consisted of owner managers of all registered small businesses in these two cities that fell within the definition of small businesses provided by the National Board for Small Scale Industries in Ghana (NBSSI). The selection was further based on whether the owner managers had had any dealings with any enterprise-support institution in Ghana. In addition, four major enterprise-support institutions were selected for the study. They include higher educational institutions, government agencies, international organisations, and financial institutions. These institutions were selected because of their pivotal role in entrepreneurship development. Thus, the sampling technique adopted in the study was purposive sampling (Patton, 2002). In all, 61 small business owners were selected for the study. In addition, 19 institutions were selected for the study. These were institutions that the researchers identified as having activities that were geared towards entrepreneurship capacity building and were willing to participate in the study. They included four higher educational institutions, five government agencies, four banking institutions, five microfinance companies, and one international organisation. The study is mainly qualitative. The analysis process started with the transcription of the interviews. The transcription was done by listening to the audiotape and making reference to the notes, which were taken alongside to make sure that all relevant data were captured. The transcription was done in word document in a structured form according to the order of the questions on the interview guide. This was done for each interview guide. With this structured data, the researcher took advantage of NVivo’s auto-coding features and imported them into NVivo software. The software then automatically developed the codes for analysis. After the transcription of the interviews and the importation into the NVivo software, the researcher identified those words and/or statements that featured prominently under each node for the purpose of analysis. With the help of the NVivo software, the researchers grouped the segments into categories that reflect the various aspects of the subject under investigation. There was thus the identification of common and relevant themes and meaning created out of them (Leedy & Ormrod, 2005; Malhotra, 2007; Zikmund et al., 2010). Bamfo et al., Cogent Business & Management (2023), 10: 2195967 https://doi.org/10.1080/23311975.2023.2195967 Page 6 of 19 The final result was, therefore, a general description of the subject under study as described by the respondents. The focus again was on common themes in the responses, even though there were divergent views on some issues raised during the interviews on both sides of the participant divide. 4. Results and discussion This section seeks to discuss the results of the study, which have culminated in the development of a framework for entrepreneurship ecosystems in developing countries with the application of institutional theory. Thus, the three pillars of institutional theory feature prominently in the discussion of the components of the framework. The discussion of the components of the framework also takes into consideration the invaluable role the major enterprise institutions are playing as well as the general attitude of entrepreneurs or owner managers with regard to their relationship with these institutions. Figure 1 shows a framework for the development of entrepreneurship in developing countries. It is made up of government agencies at the centre, regulating and coordinating the activities of the other enterprise-support institutions of higher educational institutions, financial institutions (banks and microfinance companies), international institutions, and entrepreneurs. The framework also shows the underpinning pillars of institutional theory. The components of the framework are discussed below. 4.1. The government: regulating and coordinating functions: the regulative -man In developing countries, such as Ghana, the government has a central role to play in regulating and coordinating the activities of other enterprise-support institutions and entrepreneurial firms (Michael & Pearce, 2009; Tambunan, 2008). Figure 1 shows the central role of regulating and coordinating the activities of the enterprise-support institutions and entrepreneurs. This is done through the government agencies or one main agency responsible for regulating and coordinating the activities of enterprise-support organisations and the activities of entrepreneurs. Multiplicity of Figure 1. Framework for entrepreneurship development in developing countries. Source: Author’s construct, 2020. Bamfo et al., Cogent Business & Management (2023), 10: 2195967 https://doi.org/10.1080/23311975.2023.2195967 Page 7 of 19 organised by the UNDP under the theme “Capacity building for medium, small and microenterprises.” The overarching objective of the project was to increase the productivity of small businesses to enhance their opportunity for growth and expansion and their capacity for absorbing more labour leading to poverty alleviation. Such programmes have been successful because of the effective collaboration between the international institutions and the government of Ghana. The international organisation again provides financial assistance to entrepreneurs or small business owners since their access to credit is limited (Le et al., 2006). To this end, JICA and the UNDP set up a project with a seed money of US$245,927.00 to assist entrepreneurs, particularly women in the Northern Region of Ghana; which is considered one of the poorest. In addition, the organisations provide training programmes in many areas to both current and potential entrepreneurs. JICA, for example, sponsored eight young Ghanaians for a training programme in Japan on the promotion of small and medium enterprises. The aim of the programme was to provide the young entrepreneurs with the opportunity to develop their specialities through experience and learning technologies and skills in Japan. The activities of international organisations have complemented the role of the government and other indigenous enterprise-support institutions. Their role in entrepreneurship capacity building has improved the management skills and financial capacity of entrepreneurs. Without these entrepreneurship building capacity activities of international organisations, many small business owners may have gone out of business. Their training programmes for entrepreneurs, which are most of the time free of charge, have been of immense help to small businesses. the activities of the entrepreneurs have contributed to employment generation thereby solving one of the greatest problems of Ghana-unemployment (Kayanula & Quartey, 2000). It must, however, be stated that, for these collaborations and agreements between the international organisations and the government of Ghana and other developing countries to contribute significantly to entrepreneurship development and for it to be sustainable, there is the need for some stringent measures to be put in place. First, successive government of the developing world should commit themselves to existing agreements between international organisations and the government. This is important in the sense that in some developing countries, such as Ghana, successive governments do not want to continue the “good works” of the preceding government (Graphic business 2009). This is because such programmes go to the credit of the government that started them which can help them gain political advantage. This attitude can affect international agreements to the detriment of entrepreneurs. Moreover, international institutions must commit themselves to the agreements and/or memorandum of understanding they sign with government agencies. The study found out that some international organisations after signing a memorandum of understanding with government agencies, renege on their duties. For example, the amount of money promised to these institutions is not provided. Even those that are provided do not come as scheduled. This has a tendency to put the programmes and activities of government agencies aimed at supporting small businesses in disarray. The specificity of support on the part of some international institutions does not augur well for comprehensive entrepreneurship capacity building. The study further revealed that some international institutions specify areas in the small business sector that they are prepared to support. The UNDP, for example, has stringent requirements with regard to which entrepreneurs can attend their programmes and access their financial facilities from the MFIs. As another example, JICA and UNDP set up a project with seed money of US$245,927.00 to assist entrepreneurs, particularly women in the Northern Region of Ghana (Ghana News Agency, 2013). This is very significant for entrepreneurship development in Ghana. The question, however, Bamfo et al., Cogent Business & Management (2023), 10: 2195967 https://doi.org/10.1080/23311975.2023.2195967 Page 14 of 19 is, what about their male counterpart? Entrepreneurship development programmes must be broad-based in order to have a stronger impact on entrepreneurship capacity building. 4.4. The growth and development of entrepreneurship: the attitude of entrepreneurs: the cognitive pillar One of the important stakeholders in the building of capacity for entrepreneurship growth and development in developing countries is entrepreneurs themselves. In other words, the growth and development of entrepreneurship in developing countries depends to a very large extent on the entrepreneurs themselves. The cognitive pillar emphasises entrepreneurs’ attitude, beliefs, and actions, as well as acquisition of knowledge and skills, which are vitally important for entrepreneurship development. The cognitive pillar again recognises that subjective rules and meanings in the entrepreneurial environment define appropriate behaviour or actions of entrepreneurs (DiMaggio & Powell, 1983; Scott, 2007). The importance of the appropriate actions of entrepreneurs to entrepreneurship development is underscored by the fact that the activities of entrepreneurs contribute significantly to economic development (Minniti & Naude, 2010; Peng, 2001; Tamvada, 2010). Research has suggested that there are several ways through which entrepreneurs contribute to economic development. Thus, policymakers have increasingly become interested in matters that border on entrepreneurship and have recognised the importance of small businesses to economic development. Entrepreneurs contribute to economic development through the creation of employment (Hochberg, 2002; Mohanty, 2009). In addition, they play a critical role in maintaining and developing the economic order (Wong et al., 2005). In Ghana, for example, the small business sector has been recognised as the engine of growth of the national economy (Graphic Business, 2009). Thus, the actions and for that matter inactions of entrepreneurs can go a long way to affect entrepreneurship development and for that matter economic development in developing countries. If they relent in their roles as key stakeholders, entrepreneurship development in developing countries will suffer. Apart from the government, international organisations and other enterprisesupport institutions, the entrepreneurs need to play their roles very well at the individual level (Meyer & Rowan, 1991; Scott, 2007) in order to ensure effective growth and development of the national economies of developing countries. The study has revealed that for entrepreneurs to play their roles well and make any meaningful impact on the economy of developing countries, one of the areas they need to build capacity is that of education and training. This is consistent with the cognitive pillar of institutional theory, which subscribes to the acquisition of knowledge and skills by entrepreneurs as pre-requisite for growth and development of their ventures and the economy (Meyer & Rowan, 1991; Scott, 2007) The enterprise-support organisations and the government of Ghana through its agencies are putting the necessary measures in place in order to help entrepreneurs to acquire knowledge and skill in the management of their ventures. This is as a result of the recognition of the government and other enterprise-support institutions of the small business sector as the hub of the economy of Ghana (Business & Financial Times, 2013). The enterprise-support institutions provide training to owner managers in the area of business managements such as proper book keeping, good employee relations, customer service, computer skills, effective pricing, among others. In addition, entrepreneurs are provided with business-related advice and/or information by the enterprisesupport organisations, which are relevant for the building of entrepreneurship capacity both in the short and long terms. The following comments from some enterprise support enterprise-support institutions corroborate this assertion: Bamfo et al., Cogent Business & Management (2023), 10: 2195967 https://doi.org/10.1080/23311975.2023.2195967 Page 15 of 19 We run short courses for entrepreneurs and small business owners and provide opportunities for them to meet at regular intervals to discuss issues affecting them. We invite resource persons at seminars on a wide range of topics such as total quality management, professionalism, customer care, modern techniques and others. We provide Business Development Services Support (BDSS). By this BDSS we give them training in entrepreneurship development, marketing change management, etc. We also help in building MFIs institutions to enhance access to financial services by MSMES. To this end we give them training is best practices in micro finance delivery. We provide IT facility to enhance efficient tracking of loan portfolio to ensure good portfolio quality and sustainability. We again provide matching funds (grants) for onlending to MSMES. It has been acknowledged that entrepreneurship growth and development thrives on education and training. Entrepreneurship learning and experience are very important in building entrepreneurship capacity for growth and development (Cope, 2005; Rae, 2000); particularly in the developing world where policymakers are leaving no stone unturned to ensure sustainable development. Thus, entrepreneurship development in Ghana and other developing countries’ demands that entrepreneurs’ attitude to education and training is positive. The study revealed that some entrepreneurs have availed themselves for education and training provided by the enterprise-support institutions. This has helped in building their capacity for effective management of their businesses. For example, some of them have now realised the need to separate personal finance from the finances of the business. Moreover, others have begun keeping proper books of accounts and employing some other management tools as a way of revamping their businesses. This is important; however, there is the need for these activities of the entrepreneurs to be sustained through continuous push for education and training, which demands a positive attitude from the entrepreneurs (Cope, 2005; Sinha, 2004). This is explained by the fact that the business world is volatile. New information and new ways of doing business are always evolving. For entrepreneurs to make significant contributions to the economy of developing countries, they must stay current in the business world by committing themselves to continuous acquisition of knowledge and skills and this is consistent with the cognitive pillar of institutional theory (Scott, 2007). The activities of these entrepreneurs will be given legitimacy if their attitude to the acquisition of knowledge and skill is positive and are thus able to translate them into effective and efficient running of their ventures for the benefit of society (Bosma et al., 2009; Harrison, 2008). Policy makers and other enterprise-support institutions and the general society in Ghana and other developing countries will support the activities of small business if owner managers apply modern methods of doing business and come out with competitive products. For example, the situation where some small businesses find it difficult to sell their products will be a thing of the past. There is bound to be a paradigm shift from preference for foreign products and products of large businesses to that of small businesses. Thus, the time has come for entrepreneurs in developing countries to think outside the box and avail themselves for knowledge acquisition and skills development. These are necessary ingredients for building entrepreneurship capacity for growth and development. There should also be an inordinate desire on the part of entrepreneurs for information. There should be the exploitation of all avenues with the view to obtaining accurate and timely information relevant for the growth and development of their ventures. Information is relevant for effective business decision-making and for the identification of the relevant entrepreneurial opportunities (Rae & Carswell, 2000). There is a need for comprehensive entrepreneurial attitudinal change in Ghana and other developing countries. The study further revealed that whereas some entrepreneurs have done Bamfo et al., Cogent Business & Management (2023), 10: 2195967 https://doi.org/10.1080/23311975.2023.2195967 Page 16 of 19 their best in accessing training and education programmes by enterprise-support institutions, some have woefully ignored them. Even those who acquire the needed knowledge; there is evidence to suggest that some of them do not apply the best practices that they have learnt and stick to the status-quo. This attitude on the part of the entrepreneurs does not augur well for entrepreneurship and economic development. 5. Conclusion The importance of entrepreneurship development to the national economies of the developing world cannot be overemphasised. Entrepreneurs or owner managers have contributed immensely to the socio-economic well-being of developing countries and Ghana, for that matter, as the entrepreneurship ecosystem in Ghana bears some semblance to those of other developing countries. Thus, there is the need for the building of the capacities of owner managers as a way of encouraging them to continuously push for innovative ideas that can be translated into acceptable products. Most of the time, governments of the developing world have invariably been charged with the sole responsibility of building entrepreneurship capacity. The realisation from the current study, however, is that, the capacity-building responsibility does not rest on only one institution. Five major institutions have been identified as being collectively responsible for entrepreneurship capacity building. These are government agencies, financial institutions, higher educational institutions, international institutions, and entrepreneurs or owner managers. All these stakeholders have their respective roles to play in ensuring the growth and development of entrepreneurship in developing countries. Though entrepreneurship development does not depend on the government alone, the fact still remains that, for effective results, governments of the developing world need to play a leading role in coordinating and regulating the activities of the other stakeholders or institutions that operate at intertwined layers of regulative, normative, and cognitive pillars of an ecosystem. Author details Bylon Abeeku Bamfo 1 E-mail: [email protected] Felicity Asiedu-Appiah 2 Enya Ameza-Xemalordzo 1 ORCID ID: http://orcid.org/0000-0003-1329-4952 1 Marketing and Corporate Strategy, KNUST School of Business Department of Marketing and Corporate Strategy, Kumasi, Ghana. 2 Human Resource and Organisational Development, KNUST School of Business Department of Human Resource and Organizational Development, Kumasi, Ghana. Disclosure statement No potential conflict of interest was reported by the authors. 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