A cross-national investigation of IPO activity: The role of formal institutions and national culture

• Formal and informal culture-based institutions are important determinants of IPO activity.
• Higher quality formal institutions are associated with higher levels of IPO activity.
• The performance orientation dimension of culture is positively related to IPO activity.
• The uncertainty avoidance dimension of culture is negatively related to IPO activity.
• Cultural dimensions strengthen the positive effects of formal institutions on IPO activity.

Why does IPO activity vary across countries? This study proposes that the variation is attributable to differences in the overall quality of formal institutions and in the informal institutional effects of national culture directly and interactively. The empirical analysis of IPO activity in 45 countries from 2001 to 2011 indicates that the quality of formal institutions and high levels of performance orientation each have positive effects on the level of IPO activity. Further, the positive relationship between the quality of formal institutions and IPO activity is amplified in cultures that encourage and reward performance achievement (high performance orientation) and those that favor the use of rules, and laws to enhance the predictability of future events (high uncertainty avoidance). This study provides theoretical and practical implications for understanding what motivates IPO activity around the world.