The role of informal institutions in early-stage entrepreneurship

This thesis contributes to the literature that has sought to understand the Arabic socio-cultural phenomenon of ‘wasta’ in different aspects of business life. Until now, the relationship between using personal connections (“wasta”) to achieve goals and early-stage entrepreneurship has been neglected. The aim of thesis is to evaluate the role of “wasta” in early stage entrepreneurship in Saudi Arabia. To do so, the thesis examines how wasta, as an informal institution, affects four entrepreneurial domains: liabilities of newness; entrepreneurial orientations; tax morality and the level of start-ups’ formality. Wasta is here measured on both supply and demand sides including the institutions, activities, rewards and people participating in exchanging wasta with entrepreneurs. An exploratory sequential mixed methods approach has been adopted to achieve this. In the first phase, semi-structured interviews were conducted with 20 Saudi entrepreneurs, and analysed using thematic analysis. The findings of this phase helped to gain better and deeper understanding of the phenomenon, and design the quantitative questionnaire. The second phase, a web-based questionnaire was collected from 236 early-stage entrepreneurs in three main regions of Saudi Arabia. The data gathered in this stage was statistically tested using descriptive, correlation and regression analysis. The findings reveal a variety of positive and negative significant relationships between wasta practices on the both demand and supply sides and internal and external liabilities of newness, the four dimensions of entrepreneurial orientations, tax morality and the degree of start-ups’ formality. The practical and theoretical implications are then discussed. Recommendations for future research are then outlined.