Institutions, entrepreneurship, and microfinance institutions

This dissertation focuses on the interface between social ventures, particularly microfinance institutions, and their institutions. The first two parts of this dissertation work focus on the impact of institutional factors on risk taking and performance of MFIs. Although risk taking is one of the characteristics of social ventures, we know less about the topic. Based on the performance feedback theory and institutional theory, the first essay proposes that institutional factors influence risk taking of MFIs in a negative performance situation. The second essay investigates the relationship between institutions and MFI performance. Contrary to prior research that emphasizes formal institutions, this essay suggests that social trust in a country, as an informal institution, affects the social and financial performance of MFIs. It further proposes that the relationship is mediated by service cost for borrowers, implying that institutional forces do not uniformly influence organizations. The last essay investigates how microfinance industry relate to entrepreneurial activity. Previous studies on MFIs provide inconclusive findings on their impact on entrepreneurship. Drawing on social capital perspective, this essay posits that MFIs and their clients play a role as a source of social capital and facilitate opportunity-motivated entrepreneurship in developing countries. It also suggests that the relationship is influenced by both individual and institutional factors.