Wired for opportunity, bound by rules: the conditional entrepreneurial effects of free trade agreements

Abstract

Purpose The purpose of this study is to examine how bilateral and regional free trade agreements (FTAs) shape domestic entrepreneurship across Asia and the Pacific economies. Rather than assuming that trade liberalisation automatically stimulates new firm creation, this study argues that the entrepreneurial effects of FTAs are inherently conditional on domestic capacities, particularly ICT diffusion and governance quality. Design/methodology/approach Drawing on panel data from 21 Asia and the Pacific economies over 2006–2022, this study uses fuzzy-set qualitative comparative analysis to uncover configurational pathways leading to high entrepreneurship. Findings The findings of this study reveal that entrepreneurship emerges through multiple equifinal pathways in which trade integration, institutional capacity, digital infrastructure and macroeconomic conditions play complementary, context-specific roles. FTA intensity constitutes a core condition in trade-driven and digitally integrated pathways; however, entrepreneurship also arises through institution-led and FDI-compensated routes without requiring high FTA intensity. Strong ICT diffusion consistently amplifies the entrepreneurial benefits of FTAs by reducing transaction costs and expanding digital market access. Governance quality exhibits a structurally dominant enabling role, yet demonstrates partial substitutability rather than universal necessity in pathways anchored by FDI compensation or digital–trade synergy; high governance quality does not appear as a required condition. Originality/value This study makes four original contributions. First, it provides the first configurational analysis of FTA–entrepreneurship relationships across Asia and the Pacific, demonstrating that equifinal pathways, rather than uniform mechanisms, govern entrepreneurial outcomes under trade integration. Second, it advances institutional theory by showing that governance quality operates as a structurally dominant enabling condition while remaining contextually substitutable with digital and foreign capital mechanisms. Third, it reconceptualises ICT diffusion as a systemic enabler that reshapes the transmission channel from trade openness to entrepreneurial activity, rather than treating it as a simple moderating variable. Fourth, it uncovers the asymmetric architecture of entrepreneurial success and failure, showing that success arises through multiple, partially substitutable structural alignments, while stagnation reflects compounded deficits across all foundational domains simultaneously.