Entrepreneurship and subjective vs objective institutional performance: A decade of US hospital data

Regional entrepreneurial activity can importantly affect the performance of local public service institutions. Yet, the literature explaining these relationships suffers from five methodological challenges: 1) inferred direction of influence; 2) unavailability of representative data; 3) blurring of objective and subjective performance; 4) a lack of longitudinal data; 5) and a lack of fine-grained regional data. This paper relies on a rich dataset from the ubiquitous institution of hospitals to explore these effects and overcome these challenges. We discriminate between objective and subjective institutional performance, suggesting that both performance categories deserve empirical attention, and may react differently to entrepreneurship. Our empirical approach applies econometric, mixed-effects regression models to a novel longitudinal dataset representing the entire hospital population in over 3000 U.S. counties between 2006 and 2018 merged with two sources of entrepreneurial activity at the county level. Interestingly, the results suggest divergent relationships: regional entrepreneurial activity positively affects objective institutional performance and also negatively affects subjective performance. Further, an institution's research designation attenuates the effect on subjective performance. These findings suggest that institutional performance is an often-overlooked byproduct of regional entrepreneurial activity and offer significant theoretical and policy implications.