Abstract

The rise and popularity of social media has led to changes in the way business is conducted. Studies examining the relationship between the use of social media and the rise of entrepreneurship largely focus on how entrepreneurs are using social media to grow their business. There exists a gap in the literature examining perceptions and intentions to use social media as a way to start a new business and the role that institutional quality plays in influencing these perceptions. This study aims to narrow this gap by investigating the effect of social media on perceived opportunities, perceived capabilities and entrepreneurial intentions. It also investigates whether institutional quality plays a moderating role in determining entrepreneurial intentions. Drawing on institutional theory and empirical analysis of both individual and cross-country level data from the Global Entrepreneurship Monitor (GEM) and the World Bank’s Worldwide Governance Indicators (WGI), covering 105 countries, the results of this study show that the prevalence of social media influences entrepreneurs’ perceptions and behaviour regarding business opportunities and capabilities, which, in turn, affects entrepreneurial intentions. Regarding the role of institutional quality, the intention to start a business using social media is greatest in countries with strong institutional quality. These findings imply that institutional quality serves as a catalyst in terms of the effect of social media on the decision to start a business. The contribution of this study is twofold: First, by showing that social media has a positive impact on entrepreneurial perceptions, opportunities, and capabilities, this study contributes to the wider literature on “techno-optimism”. Second, by investigating the role of institutions in determining how social media influences entrepreneurial intentions, this study shows that institutions play an important role in fostering the use of digital technologies for entrepreneurial growth in a country.