How informal institutions influence entrepreneurs' cross-border location and industry choices: Empirical evidence from Macao's associations

Cross-border informal institutional bonds rooted in ancestral culture constitute a quintessential social-capital network that enables entrepreneurs to overcome resource and information barriers. Leveraging data from Macao’s associations, this paper builds a new index of the territory’s embeddedness in these networks. Panel estimates show that more prosperous ancestry-based informal institutions in the home region boost inbound investment from places of shared ancestral culture and steer entrants into industries that align with local comparative advantage. To address endogeneity, we combine Qing-dynasty prefectural genealogy counts with Macao’s GDP to create a novel instrumental variable.