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Effective Factors in Improving Iran's Perceived Business Environment


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Evolutionary economics theory and cognitive psychology emphasize that individuals' subjective perceptions will change through learning from the environment. So by managing environmental factors, it's possible to change the entrepreneurs' perception of business environment. A positive attitude toward business environment is a key factor influencing people's intention to create a new venture. Given the uniqueness of social, political, cultural and economic context in every country, there are some important variables that have the most influence on perception of business environment. This study is going to identify the most important elements in Iran that influence PBE by using Delphi method. Through participation of 52 experts as Delphi panelists in three rounds, we found that social capital (in macro-level as good governance and in micro-level as social capital), performance-based culture, economic opportunities, resources and abilities, and macro-level knowledge management, have the most influence on perception of business environment in Iran. Based on analysis of panelists' opinions there are consensus and group stability among them. Kendall's concordance coefficient in third round is nearly high (w=197.0) and the rate of variation in opinions between second and third rounds, is about 4 % .
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Journal of Administrative Management,
Education and Training (JAMET)
ISSN: 1823-6049
Volume (12), Special Issue (6), 2016, 378-390
Available online at
Kh. Safari, H. Danai, M. Mahmoodi. M, M. M. Parhizgar, Effective Factors in Improving Iran’s Perceived
Business Environment, Journal of Administrative Management, Education and Training, Volume (12),
Special Issue (6), 2016, pp. 378-390
Journal of Administrative Management, Education and Training (JAMET)
Effective Factors in Improving Iran’s Perceived
Business Environment
Kh.Safari, H.Danai, M.Mahmoodi.M, M.M.Parhizgar
Evolutionary economics theory and cognitive psychology emphasize that individuals'
subjective perceptions will change through learning from the environment. So by
managing environmental factors, it's possible to change the entrepreneurs’ perception of
business environment. A positive attitude toward business environment is a key factor
influencing people’s intention to create a new venture. Given the uniqueness of social,
political, cultural and economic context in every country, there are some
important variables that have the most influence on perception of business environment.
This study is going to identify the most important elements in Iran that influence PBE by
using Delphi method. Through participation of
experts as Delphi panelists in three
rounds, we found that social capital (in macro-level as good governance and in micro-
level as social capital), performance-based culture, economic opportunities, resources
and abilities, and macro-level knowledge management, have the most influence on
perception of business environment in Iran. Based on analysis of panelists’ opinions there
are consensus and group stability among them. Kendall’s concordance coefficient in third
round is nearly high (w=
) and the rate of variation in opinions between second and
third rounds, is about
Keywords: Perceived Business Environment, Good Governance, Culture, Economic
Opportunities, Resources and Capabilities, Small and Medium Sized Enterprises.
Like other emerging economies, Iran faces risks and opportunities as it increasingly participates in
the global market. To minimize risks and capitalize opportunities, Iranian policy makers must focus
on strategic and long-term programs. Current pressures on governments to create job, prosperity,
wealth and welfare have led to increased emphasis on small and medium sized enterprises (SMEs)
and private sector, which are seen as a potential solution to crises of unemployment, poverty, and
inequity and their economic and social benefits are widely recognized (Altenburg & Drachenfels,
2008; Ayyagari, Beck, & Demirguc-Kunt, 2007; Ghanatabadi, 2005; OECD, 2006; Rocha, 2012).
The role of the business environment as a leading factor in the nations’ competitive position and as
an appropriate context for the formation of SMEs is widely accepted today (Bîrsan & Gordan, 2007,
p. 297; OECD, 2006; Wennekers, Thurik, van Stel, & Noorderhaven, 2007; World Bank Group,
2016). Based on Austrian and institutional economics it is obvious that improving social, cultural,
economic and political factors, as components of business environment, are key infrastructures for
developing SMEs (Baumol, 1990; D. North, 1995). To start a new business as an entrepreneur or
self-employed person, both “opportunity” and “willingness” are essential (Praag, 1997, p. 39).
Opportunity is “the possibility to become an entrepreneur if one wants to” and it depends on starting
capital, entrepreneurial ability and the economic environment. Willingness to start as an
entrepreneur “depends on both individual preferences for the special features of entrepreneurship
as well as on the alternative available options and their perceived attractiveness” (Wennekers &
Thurik, 1999) also existence of both opportunity and willingness highly depend on business
environment and social context of a country. Baumol (1990) argues that total supply of
entrepreneurs and the productive contribution of the society’s entrepreneurial activities are heavily
influenced by the relative payoffs society offers to such activities (Baumol, 1990). It’s noteworthy
that, the importance of attitudes, both in general and toward entrepreneurship, in explaining
people’s aspiration to create a new venture has been recognized and empirically confirmed in
previous studies (Malhotra, 2003; Schwarz, Wdowiak, AlmerJarz, & Breitenecker, 2009, p. 274).
Entrepreneurial intent has proven to be a primary predictor of future entrepreneurial behavior
(Schwarz et al., 2009, p. 273). According to intention-based models, intention is immediate
antecedent of behavior, while intention is determined by attitudes, and attitudes are affected by
exogenous influences (such as traits, demographics and situational variables) (Botsaris &
Vamvaka, 2016, p. 434). Luthje and Franke (2003) argue that the intentions to become business
founders is influenced both indirectly by steady personality traits and directly by contextual factors,
which are usually easier to modify (Luthje & Franke, 2003, p. 143). Here what is considered as
environment is subjective environment that is perceived by individuals, because people react and
make decision based on what they see and perceive (Robbins, 1990). Also social cognition models
start from the assumption that an individual’s behavior is best understood in terms of his or her
perceptions of the social environment(Conner & Norman, 2005). Perception can be defined as a
process by which individuals organize and interpret their sensory impressions, in order to give
meaning to their environment. However, what one perceives can be substantially different from
objective reality (Robbins, 1990). According to subjectivist theory of entrepreneurship, a given
external environment does not strictly determine decision-making alternatives and choices. There
are substantial possibilities for the creativity and autonomy of individual choice (Kor, Mahoney, &
Michael, 2007, p. 1190) Kore et al. (2007) base on Penrose (1959) elaborate that entrepreneurs’
perceptions and personal knowledge shape a firm’s subjective productive opportunity set and also
explain that entrepreneurial perceptions and knowledge partly originate from entrepreneurs’
experiences in specific business settings such as the firm, the management team, and the industry
(Kor et al., 2007, p. 1187). Baumol (1990) explains that there is almost the same level of
entrepreneurial spirit among people and regions. But due to different contextual factors (business
environment), the entrepreneurs may become productive or unproductive (Baumol, 1990).
According to Mitleton-Kelly (2003), organizations are always co-evolving within a social
ecosystem because each organization is a fully participating agent which both influences and is
influenced by the social ecosystem made up of all related businesses, consumers, and suppliers, as
well as economic, cultural, and legal institutions (Peltoniemi & Vuori, 2005, p. 271). So in order to
continuous improving an ecosystem, we have to manage the entire ecosystem (Power & Jerjian,
Journal of Administrative Management, Education and Training (JAMET)
2001, p. 3). Therefore, it is reasonable to focus on the new business creation and entrepreneurial
process as an embedded process in a social, cultural and economic context (Schwarz et al., 2009,
p. 276). It is necessary to account for dynamic interaction between the individual entrepreneur and
the environments (social, financial, technical, etc.) in which new ventures are created, because no
attitude exists in isolation and there are numerous interconnections between attitudes and various
interrelated objects (Robinson et al., 1991). But even if positive attitude toward business
environment is likely to benefit from improvements in all dimensions of the business environment,
addressing all of them at once would be challenging for any government. Thus, understanding the
most important elements and prioritizing them is important in reform efforts. Therefore,
investigating what factors determine the entrepreneurial attitudes in a given country is a crucial
issue in small and medium sized enterprises’ business environment. So a central question that arises
is what factors determine perceived business environment among entrepreneurs and owners of
SMEs in Iran. Literature review shows that many variables are recognized as important exogenous
variables which can shape the perceived business environment (PBE) (attitude toward
entrepreneurship and new business creation) such as the ease of doing business (World Bank Group,
2016), social and institutional context and political system (Baughn & Neupert, 2003, p. 313;
Baumol, 1990; Ferreira, Raposo, Gouveia Rodrigues, Dinis, & do Paço, 2012; S. M. Lee &
Peterson, 2000; D. North, 1995; Wennekers & Thurik, 1999), cultural values and beliefs (Baughn
& Neupert, 2003; Hopp & Stephan, 2012; Santos, Roomi, & Liñán, 2016, p. 49; Schwarz et al.,
2009, p. 276; Verheul, Wennekers, Audretsch, & Thurik, 2002), economic opportunities (Praag,
1997, p. 39; Thai & Turkina, 2014; Wennekers & Thurik, 1999, p. 34), resources and abilities
(Jiménez, Palmero-Cámara, González-Santos, González-Bernal, & Jiménez-Eguizábal, 2015;
Maslow, Frager, Fadiman, McReynolds, & Cox, 1970; Nurmi, 1991; O’Brien, 1986; Thai &
Turkina, 2014), knowledge management (D. Chen & Dahlman, 2005; Malhotra, 2003) and also
numerous other factors But because there are cultural and governmental differences between
countries, implemented programs and policies for improving business environment to support
entrepreneurship and small businesses should be appropriate to the context of each country (J.-W.
Lee & W.Tai, 2010, p. 62).
Literature review:
Here we will explain and review variables that have been proposed and rated by Delphi panelists
as the most important factors that influence the entrepreneurs and SMEs owners’ perception of
business environment in Iran.
Good Governance
Good governance, the benign and efficient management of society via decisions and institutions,
can make a major contribution to the well-being of nations and also promotes not only economic
prosperity, but also freedom, the rule of law, human rights, security, and peace (Rindermann,
Kodila-Tedika, & Christainsen, 2015, p. 98). World Bank researchers have defined good
governance as the quality of public services, the quality of the civil service and the degree of its
independence from political pressures, the quality of policy formulation and implementation, and
the credibility of the government's commitment to such policies. Good governance is measured by
six indicators: voice and accountability, political stability and absence of violence/terrorism,
government effectiveness, regulatory quality, rule of law, and control of corruption (Kaufmann,
Kraay, & Mastruzzi, 2011, p. 221). Economists now generally admit that institutions or governance
matter for the performance of a nation, especially from an economic point of view (Kodila-Tedika,
2012, p. 83). In particular, cross-national research has yielded valuable insights into formal
institutions influencing entrepreneurial behavior (Hopp & Stephan, 2012, p. 917; Stel, Storey, &
Thurik, 2007). Institutions shape the economic environment in which firms and individuals operate,
in particular institutions supply incentives for firms and individuals. It is accepted widely that
enterprise promotion is driven by social and political considerations rather than by economic
reasoning (Ayyagari et al., 2007; Rocha, 2012, p. 337). It is all too clear that when governments
perform poorly, the consequences are wasted resources, undelivered services, and denial of social,
legal, and economic protection for citizensespecially the poor (Grindle, 2004, p. 525). Baumol
(1993) found that institutional arrangements or other social phenomena affect the quantity of
entrepreneurial effort. These structural and cultural factors can also determine the allocation of
entrepreneurship (Wennekers & Thurik, 1999, p. 34) It means, for an entrepreneur, acting as a
productive or unproductive one, heavily depends on the rules of the game that is emerged by
institutions. We know that government as a social institution, plays an important role in creating
favorable conditions for development of efficient institutions and financial situation, so we can
conclude that improved institutional quality is associated with increases in financial development
at least in the short run, and this is particularly true for lower income countries (Huang, 2010, p.
1675). And also some researchers show that, moving toward democracy has a positive effect on
financial development (Girma & Shortland, 2008; Pourrostami, 2011; Yang, 2011).
Much evidence points to the primacy of human capital for both growth and democratization. The
first order effect comes from human and social capital, which shape both institutional and
productive capacities of a society (Rindermann et al., 2015, p. 99). Some researchers have shown
that cultural norms have indirect effects on new business creation and entrepreneurship (Baughn &
Neupert, 2003; Gathungu & Mwangi, 2014, p. 118; Hopp & Stephan, 2012; Kreiser, Patel, & Fiet,
2013; J.-W. Lee & W.Tai, 2010; Luthje & Franke, 2003; McGrath, MacMillan, & Scheinberg,
1992; Schwarz et al., 2009; Thai & Turkina, 2014, p. 9). Community-level cultural norms impact
important supply-side variables (entrepreneurial self-efficacy and entrepreneurial motivation)
which in turn influence nascent entrepreneurs’ success in creating operational ventures (Baughn &
Neupert, 2003; Hopp & Stephan, 2012).As much as entrepreneurship is a performance-based
behavior and success in the venture creation process is due to the efforts of the nascent entrepreneur,
entrepreneurship is also a behavior contingent on social support through others(Hopp & Stephan,
2012, p. 924; Stephan & Uhlaner, 2010). An environment in which various community actors
actively support business creation efforts is likely to enhance entrepreneurs’ access to resources
and make their venture creation efforts ultimately successful (Hopp & Stephan, 2012, p. 924).
Literature shows that cultures with stronger social capitals, have higher rates of self-efficacy
(Baughn & Neupert, 2003; Hopp & Stephan, 2012) and business creation (Stephan & Uhlaner,
2010). Hopp and Stephan (2012) suggest that the more nascent entrepreneurs perceive community
support to be available, the more they will feel motivated to ‘keep going’ and invest greater effort
in the venture creation process rather than abandon it (Hopp & Stephan, 2012, p. 924). Aldrich and
Journal of Administrative Management, Education and Training (JAMET)
Zimmer (1986) have also stressed that individuals cannot be viewed as atomized decision-makers
who operate as autonomous entities. Likewise, the representatives of the attitude approach to the
prediction of entrepreneurship remark that attitudes do not exist “in isolation”. Therefore, it is
reasonable to focus on the entrepreneurial process as an embedded process in a social, cultural and
economic context (Schwarz et al., 2009, p. 276). North (1995) argues that the language and mental
models form the informal constraints that define the institutional framework of the tribe and are
passed down between generations as customs, taboos, myths that provide the continuity that we
call culture and forms part of the key to path dependence (D. North, 1995, p. 4). The perception of
community support and performance-based culture affect the beliefs and will intensify venture
creation process an effort to develop it (Choi & Chang, 2009; Hopp & Stephan, 2012; Stephan &
Uhlaner, 2010).In this study, culture is divided into two categories: supportive culture (social
capital), and performance-based culture, Since we believe that each category has its own impacts
on different phases of business creation process and they are able to build different entrepreneurs’
PBE in a given country.
Economic Opportunities
As mentioned, in order to start as an entrepreneur both willingness and opportunity are essential
(Praag, 1997, p. 39). Opportunity means the possibility to become an entrepreneur if one wants to.
Moreover it depends on starting capital, entrepreneurial ability and the economic environment
(Wennekers & Thurik, 1999, p. 34). In this research, we used Thai and Turkina (2014) definition
of economic opportunities as a factor which includes GDP growth, innovation, financial
development and economic integration, will prepare such situation that entrepreneurs see more
opportunities to create their own business (Thai & Turkina, 2014). They argue that financial
development, innovation and economic advancement significantly boost new business
registrations. A better financial system and economic growth strengthen demand and increase the
availability of credits for newly-registered ventures and of the technological and economic
infrastructure necessary to operate in a formal economy (Thai & Turkina, 2014, p. 497). Other
authors (Badinger, 2005, p. 52; Balassa, 2013; Thai & Turkina, 2014, p. 497) also emphasize that
economic integration enhance economic opportunities. International economic integration can also
foster entrepreneurship by promoting self-reliance and independent action, placing a higher value
on individual accomplishments, nurturing assertiveness and goal achievement, and offering more
opportunities for individual success(Thai & Turkina, 2014, p. 497). Countries that have more
developed financial systems engage in trade and business with other economies thereby provide
more economic opportunities. financial development is Also a tool for innovation and subsequent
economic growth.
Knowledge Management
In today’s increasingly turbulent and competitive environment, knowledge is widely recognized as
the main source of competitive advantage of firms (C.-J. Chen & Huang, 2007, p. 104) and
countries (Malhotra, 2003). in order to create the right business environment, in addition to
monetary assets and physical resources that are provided through economic opportunities, having
abilities and capabilities, skills, intellectual capital and knowledge that are provided through
knowledge management, are also essential. besides, somewhat knowlegde is an alternative to
financial and physical assets (J. Chen, Zhu, & Yuan Xie, 2004). Obviously, countries that have
more knowledge assets and intellectual capital will surpass other countries in terms of achieving
high levels of growth and development (Malhotra, 2003). So as envisioned in the UN Millennium
Declaration, for development of national knowledge, societies should encompass social, cultural,
and human development besides economic growth (Malhotra, 2003). Due to the economic change
is strictly connected to learning processes (Rizzello, 2000, p. 132) the economic and institutional
regime of an economy needs to be such that economic agents have incentives for the efficient use
and creation of knowledge, and thus should have well-grounded and transparent macroeconomic,
competition and regulatory policies (D. Chen & Dahlman, 2005, p. 8). Also educational policies
are important for both thespread of basic skills and the emergence of specialists working in
political,economic, and scientific institutions managing processes anddeveloping new
technologies (Rindermann et al., 2015, p. 98). In modern and more complex jobs, learning is a
prerequisite to becoming an effective worker. It is obvious that people with greater cognitive ability
learn from their mistakes and can therefore mimic what works elsewhere(Kodila-Tedika, 2012;
Rindermann et al., 2015, p. 99) knowledge management encompasses the spectrum of management
concerns from knowledge creation or codification to knowledge diffusion and exploitation (C.-J.
Chen & Huang, 2007, p. 104). Consequently, knowledge systems at the national level, including
rules and regulations, frameworks and national infrastructure which can facilitate the usage,
sharing, creating and reconstruction knowledge in order to strengthen socio-economic growth
(Malhotra, 2003)
Resources and abilities
The major challenge in creating an operational venture is to access sufficient resources, both
tangible, such as finance and also intangible such as information and emotional support (Hopp &
Stephan, 2012, p. 924). Resources and abilities, including all individuals’ physical, financial and
non-financial resources such as knowledge and skills that provide subjective and objective support
for business affairs (Klein, Mahoney, McGahan, & Pitelis, 2013; Kor et al., 2007; Thai & Turkina,
2014). For example with better education (Jiménez et al., 2015) and greater personal income, people
both desire and have the means to pursue self-actualization (Maslow et al., 1970; Nurmi, 1991) and
become more goal oriented (Thai & Turkina, 2014). those people with a higher level of education
may also have a greater probability of achieving success and the fulfillment of their personal goals,
not only as owners of firms, but also as employees (Jiménez et al., 2015, p. 206). Furthermore, in
countries with low unemployment and high social security, people tend to strive for performance
improvement and excellence (O’Brien, 1986; Thai & Turkina, 2014, p. 499). Rindermann et al.
(2015) emphasize on cognitive ability and argue that cognitive ability is not only helpful in
navigating the educational selection and competence building process in schools, but also in coping
with conditions in jobs and in everyday life (Kodila-Tedika, 2012; Rindermann et al., 2015, p. 99).
The distributed nature of a sector in which authority, legitimacy, resources, and influences are often
highly dispersed and the ambiguous nature of distributed leadership make research on the topic
extremely challenging (Fletcher & Marchildon, 2014, p. 2). Based on importance of social, cultural
Journal of Administrative Management, Education and Training (JAMET)
and economic context in relation to perceived business environment and its changing and
evolutionary nature (Robinson et al., 1991; Schwarz et al., 2009, p. 274) implementing a qualitative
approach to identify effective factors that create PBE can be very helpful. This study investigates
experts’ opinion about the most effective factors that influence Iranian entrepreneurs’ PBE by using
Delphi method. We have reached consensus and stability in responses through three rounds.
In the following, Delphi method, the size and sampling procedure and the results of the study are
Delphi method
Delphi is a method or systematic approach to get opinions and professional judgments of an expert
group about an special issue or a question (Fletcher & Marchildon, 2014, p. 3). The main advantage
of the Delphi is the achievement of consensus in a given area of uncertainty or lack of empirical
evidence. The feedback between rounds can widen knowledge and stimulate new ideas and in itself
be highly motivating and educational for the participants (Powell, 2003, p. 377). In this study, to
investigate the Delphi panelists’ opinions about effective factors in PBE by entrepreneurs and
SMEs’ owners, we prepared an integrated questionnaire with the most important elements that we
found in literature review and also we asked the Delphi participants to add any factors that were
important from their point of view. In every Delphi round, after determining the importance of each
factor (in 5 points likert scale), also we wanted participants to rank every factor (1 means the first
important factor). In this regard, after three rounds, to some extent we reached consensus and group
stability in planists’ opinions, therefore we found countinuing the Delphi rounds would not add
new findings (von der Gracht, 2012), so Delphi procedure was stopped after three rounds.
Population and Sampling
The statistical population of experts in business environment have been considered senior executive
managers, experts that work in science and technology parks, management and economics
university professors and Ph.D. students that are working in this field. By using judgmental
sampling, 40 experts from various sectors were selected as panel members. Table 1 shows the
number of experts that contributed in each round and also their participation rates.
Table 1: Sample quantity of participants in different rounds of Delphi method
Consensus Measurement
To reach the consensus among Delphi participants, at first we eliminated the factors that their
importance were rated less than 4, by using one-sample T test. Therefore we investigated consensus
and group stability by means of importance average and eht proportion of change in standard
deviation between different rounds. Also we used Kendall's coefficient of concordance (w) to
investigate consensus in ranking the factors. As we noted before we stopped Delphi method in third
round because we reach the acceptable consensus and group stability. It is noteworthy that the
measurement of consensus alone is not sufficient for Delphi studies, even more since it is not the
primary aim of the Delphi method. Delphi facilitators should definitely test for both stability and
the level of agreement (consensus) in order to fully exploit the data. Hence we have used group
stability instead of individual stability, and a 15% change or lower in any two distributions is
considered a stable situation (von der Gracht, 2012, p. 1533).
Table 2: The results of Delphi method in different rounds
Related factors
First Round
Second Round
Third Round
Voice and Accountability
Political Stability
Government Effectiveness
Regulatory Quality
Rule of Law
Control of Corruption
Groups and Networks
Trust and solidarity
Collective actions and Cooperation
Information and Communication
Social Cohesion & Inclusion
Empowerment & Political action
A Conductive Economic and Institutional
Educated and skilled workers
effective innovation system
ICT infrastructure
Economic growth
Financial Development
Economic integration
Financial Resources
Abilities, physical & social resources
Future orientation
uncertainty avoidance
Performance orientation
Power distance
gender equity
Perceived economic environment
Perceived institutional environment
Perceived regulation environment
Perceived social and cultural norms
Change between distributions
Table 2 illustrates the average importance and the standard deviation of every factor in different
Delphi method’s rounds. It also shows the eht proportion of change in standard deviation between
second and third rounds has changed only about 4%, so Delphi facilitators decided to stop the
Delphi rounds. Tables 3 and 4 respectively show the Kendall's coefficient of concordance (W) in
different rounds, and the rank of each effective variable in PBE.
Journal of Administrative Management, Education and Training (JAMET)
Table 3: Kendall’s Coefficient of Concordance (w) in deferent Delphi Iterations
Delphi Iteration
Kendall’s Coefficient of Concordance (w)
Table 4: Rating of effective variables in PBE
Average of importance
Social Capital
Good Governance
Economic Opportunities
Resources and Abilities
Performance-based culture
Knowledge management
Results and discussion
A quick look at the list of economies at the top of the ease of doing business ranking reveals that
the best 30 performers are not those with little regulation but those with good rules that allow
efficient and transparent functioning of businesses and markets while protecting the public interest
(World Bank Group, 2016). It can represent that the consequences of regulations and the
individuals’ perceptions of all institutional context are more important than the regulations
separately. Previous researches that recognized the importance of external influence factors for an
individual’s interest to become an entrepreneur concentrated particularly on a person’s social
networks, the image of entrepreneurs in society, socio-cultural norms, and barriers to
entrepreneurship (Luthje & Franke, 2003; Schwarz et al., 2009, p. 276).Mack and Mayer (201)
argue that interacting components of entrepreneurial ecosystems which foster new firm formation
and associated regional entrepreneurial activities, may remain trapped in a specific phase of growth
or continue to evolve over time (Mack & Mayer, 2016). Therefore, in our studyaccording to social
cognition model and other discussed theories, we believe that the perception of individuals is the
cornerstone of starting a new business as an entrepreneur. Based on literature review and Delphi
participants’ opinion, the perceptions of entrepreneurs and SMEs’ owners are in relation to a wide
range of underlying social factors. Accordingly, good governance, social capital, economic
opportunities, individuals’ abilities and resources, performance-based culture and knowledge
management were determined as the most important factors in shaping an entrepreneur’s PBE in
Iran. The entrepreneurs’ PBE is an extremely important factor, that is able to impulse them to start
new businesses or develop their own businesses, and sometimes it may hamper entrepreneurs from
being productive and therefore incline them toward the view that they should take no action or at a
special stage incline them to abuse the situation. In the path to development and evolution, external
and internal (subjective) factors have mutual influence, and they are able to change each other. As
a result, in every period, so as to facilitate evolution, it is essential to identify and manage the most
important external factors. According to institutional economists, if there are suitable institutional
structures and transparent regulatory systems that reward the productive activities in society that
will result in long-term economic growth and development (Baumol, 1990; D. C. North, 2006; D.
North, 1995). The more the institutional environment of a given country is healthy, the more people
have better perception of environment, and therefore they will work more confident and
enthusiastic, and in return, it helps them to improve their institutional environment even better than
before. In order to accelerate and continue economic growth and development, transitional
economies like Iran need more attention to private and SMEs sectors (World Bank, 2014). As ease
of doing business reports by World Bank show, executed programs in Iran have not been that much
successful in improving its business environment until now. So we argue that large part of the
problem relates to lack of long-term and strategic programs and also little attention to social,
political and cultural infrastructures that are needed to attract the participation of most individuals.
It is clear that brain drain (that shows individuals have not a good perception of environment) is
strongly influenced by lack of attention to social, political and cultural infrastructures in a given
country, will reduce intellectual, human and social capital, and lastly it will influence institutional
structures in that country. Based on path dependency theory, where we will be in the future is a
result of what has happened now so we have to consider these elements in a right way that we wish
to be in future. Unfortunately one of the predicaments in the countries that have ample natural
resources, seem to be no motive for learning effective and productive issues, because the social
structures will reward unproductive and rent seeking behaviors(Baumol, 1990). Therefore, it is
necessary to have several simultaneous short-term and long-term programs for improving
institutional environment in order to attract the most participation of all the people, because it has
been proven that without consider social and institutional context, no plan will last for a long time.
According to Nelson and Winter’s evolutionary theory of the firm (1982), over time, the economic
analogue of natural selection operates as the market determines which firms are profitable and
which are unprofitable, and tends to winnow out the latter (Kor et al., 2007, pp. 11881189), we
accept that the business environment that is a small part of institutional and social environment of
a country, can highly determine the capabilities, rules, the path of learning and the other features of
firms and individuals, which, in turn, can lead to special kind of perception or mental model about
business and entrepreneurship in that country - people's mindset about business. So through
strategic planning, it is possible to conduct constituent elements of the business environment in the
long run, and also mental models and attitude toward business environment. Hence it is possible to
incline entrepreneurs toward productive and useful activities and making competitive advantages
for their countries. The results of this study is in accordance with Baumol’s productive and
unproductive entrepreneurship theory (1990) that says while the total supply of entrepreneurs varies
among societies, the productive contribution of the society’s entrepreneurial activities varies much
more because their allocation between productive activities such as innovation and largely
unproductive activities such as rent seeking or organized crime (Baumol, 1990, p. 893). The rule
of the game the reward structure in the economy- determines the kind of the activity that an
entrepreneur will select. In other words, an entrepreneur’s PBE will determine to be productive or
unproductive. Also based on immaturity-maturity theory, keeping people immature is built into the
very nature of the formal organization. So accordingly we can conclude that the reason of
unproductive private and SMEs sectors in a country depends on institutional, governmental, legal,
political and social systems and every factor that influences people’s perceptions and mental
models. To sum up, in order to plan effective long-term programs, it’s necessary to consider
cognitive factors and mental models of the individuals and also the consequences of decisions in
context of society, culture, policy and economy.
Journal of Administrative Management, Education and Training (JAMET)
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KHALIL SAFARI, Department of Management, Payame Noor University (PNU), P.O. BOX
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Corresponding Author Email:
HABIB-ALLAH DANAI, Assistant Professor, Department of Management, Payame Noor
University (PNU), P.O. BOX 19395-3697, Tehran, Iran.
MOHAMMAD MAHMOODI MAYMAND, Associate Professor, Department of Management,
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MOHAMAD MEHDI PARHIZGAR, Associate Professor, Department of Management,
Payame Noor University (PNU), P.O. BOX 19395-3697, Tehran, Iran.
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