This paper explores the development of social entrepreneurship from an institutional perspective.
Social entrepreneurship implies the creation of a new business model that has both a non-profit and
a for-profit element and aims to create value by addressing significant social or environmental issues.
The study focuses on how formal institutions measured through the World Governance Indicators’
impact the development of social enterprises and how informal institutions operationalized with
the Hofstede cultural dimensions moderate this relationship. The existing research suggests two
opposing theories regarding the institutional effects on social entrepreneurship: on the one hand,
institutional voids are known to create business opportunities for social enterprises; on the other
hand, institutional support is essential for the development of social entrepreneurship. Having
tested both perspectives based on the Global Entrepreneurship Monitor (GEM) 2022 country
level data, we advocate for the institutional support hypothesis and further reveal that power
distance, individualism, and indulgence are important cultural dimensions that moderate the focal
relationship between the development of social entrepreneurship and formal institutions.
In light of the two previously described conflicting perspectives and the duality of formal institutions’
effects, we next present evidence of a curvilinear inverted U-shaped relationship between social
entrepreneurship and formal institutions. This research implies that, as opposed to low or high
levels, an intermediate degree of institutional development guarantees a better environment
for social entrepreneurship. This finding is supported by examples of social entrepreneurship
development in Russia, UAE, and Switzerland. This paper contributes to the institutional view
of social entrepreneurship and discusses ways to encourage its development to further foster
achievement of the UN SDGs