Across Countries, but Not Within? Digital Connectivity, Institutional Integrity, and Formal Business Entry in Southeast Asia
Tita Alfaricha (a*), Syifa Salina (b), and Syifaa Rizqina Ramadhani (b)

Department of Business Administration, Faculty of Social and Political Sciences, Universitas Diponegoro

Abstract

Digital connectivity and institutional integrity are frequently discussed as separate conditions surrounding entrepreneurial activity, yet their joint association with formal business entry has received little direct, region-specific attention in Southeast Asia. This study examines how internet-use penetration and control of corruption are associated with formal business entry measured through New Business Density across eleven Southeast Asian economies between 2007 and 2024. Using an unbalanced country-year panel of 178 observations, the study estimates three nested models: pooled OLS with digital connectivity only, pooled OLS adding institutional integrity, and a preferred specification with country and year fixed effects. Pooled estimates are consistent with both digital connectivity and institutional integrity being positively associated with formal business entry, echoing prior cross-country evidence. However, in the preferred fixed-effects model, neither association is statistically significant under country-clustered inference, indicating that the pooled patterns largely reflect persistent structural differences across countries rather than consistent within-country, year-to-year relationships. The findings suggest that digital connectivity and institutional integrity function more clearly as cross-country structural conditions than as short-to-medium-term drivers of formal business entry within the same economy, with implications for how digital-entrepreneurial-ecosystem and governance indicators are interpreted in regional entrepreneurship research. The study contributes harmonized, Southeast Asia-specific panel evidence and a transparent illustration of how sensitive digital-institutional associations with formal entry are to pooled-versus-fixed-effects modeling choices in a small-cluster panel setting.

Keywords: Control of Corruption- Digital Entrepreneurial Ecosystem- Fixed-Effects Panel Estimation- Institutional Integrity- New Business Density.

Topic: Responsible Digital Entrepreneurship: Fostering Sustainable Business Ecosystems through Innovation and Ethical Governance (Digital Entrepreneurship- Sustainable Ecosystems- Business Innovation)