Understanding how institutional voids affect entrepreneurship has long been important for scholars, policymakers, and business practitioners, as it can either foster innovation by reducing bureaucratic hurdles or stifle growth by increasing costs and uncertainty. This contradiction is reflected in the findings of the research on the link between corruption and entrepreneurship—with some studies suggesting that corruption hinders entrepreneurial activity, while others argue it may facilitate it. This study seeks to reconcile these conflicting perspectives by providing a holistic analysis of how corruption influences both opportunity-motivated (OME) and necessity-motivated entrepreneurship (NME), considering the non-linear effects of corruption and the moderating role of entrepreneurs' socio-cognitive traits. Drawing from the Too-Much-of-a-Good-Thing (TMGT) Effect, we hypothesize that corruption exerts a U-shaped effect on OME and an inverse U-shaped effect on NME. We further posit that this effect is moderated by entrepreneurs’ alertness to opportunities. Analyzing data from 140,250 entrepreneurs across 96 countries (2011-2019), our findings confirm the hypotheses, revealing complex and counterintuitive patterns. The results demonstrate that corruption can both hinder and facilitate entrepreneurship, contingent on the corruption level and the entrepreneur’s motivation as well as entrepreneurs’ alertness. This study advances the debate on the corruption paradox by reconciling conflicting views and underscoring the importance of accounting for the heterogeneity in entrepreneurial motives and traits.
