The impact of migration and institutions on new business creation: integrating social capital theory and institutional theory

Abstract Migration and remittances now shape entrepreneurial ecosystems across the developing world, yet their effects remain contradictory: financial remittances sometimes spur new ventures and sometimes suppress them, and emigrant stocks produce inconsistent outcomes across contexts. We help to resolve this puzzle by theorizing nonlinear relationships and institutional contingencies. Drawing on transnational social capital theory and institutional theory, we introduce Social Connectivity Capacity (SCC), the structural capacity of transnational networks to transmit entrepreneurially relevant knowledge, operationalized as the product of emigrant stocks and internet penetration. Panel analyses of 85 migrant-sending countries (2006–2020) show that financial remittances exhibit a convex, accelerating relationship with new business creation, while SCC follows an inverted U-shape. Formal institutional quality moderates both relationships: stronger governance amplifies remittance-driven entrepreneurship and shifts SCC's optimum rightward. Results are robust across GLS and panel-corrected-SE estimators and to log-transformation. These findings account for prior mixed evidence and show that migration's entrepreneurial effects depend jointly on remittance intensity, digital connectivity, and institutional context. Policymakers in migrant-sending countries can therefore strengthen entrepreneurial outcomes by calibrating diaspora engagement strategies to their specific combination of remittance intensity, digital infrastructure, and governance quality.