Introduction: Despite the remarkable quantitative growth of Iran's startup ecosystem over the past decade, it continues to face low survival rates and slow scale-up among new ventures — a paradox that existing literature, relying mainly on descriptive ecosystem frameworks (e.g., Isenberg or Stam) or new institutionalist approaches, has been unable to explain at the mechanism level. This study aims to identify the institutional mechanisms for entrepreneurship development in Iran's startup ecosystem within the framework of John R. Commons's (1934) transactional theory — a framework that, unlike its theoretical rivals, integrates the three dimensions of conflict, dependency, and order simultaneously within the transaction as the unit of analysis.



Method: This study employed a qualitative approach using reflexive thematic analysis (Braun & Clarke, 2022). Data were collected through 18 semi-structured interviews with five categories of key participants — founders, venture capitalists, accelerator managers, policymakers, and ecosystem researchers — and validated through triangulation with secondary sources (GEM, 2023; IRVC, 2024; StartupBlink, 2023). The coding process, from open codes through axial codes to themes, was documented transparently and cross-checked by two independent coders on 20% of the data, yielding a Cohen's kappa of 0.78. Deviant cases inconsistent with the dominant pattern were also identified and reported as part of the reflexive analytic procedure.



Findings: Analysis of 283 initial codes, 54 axial codes, and 16 themes revealed four overarching categories: (1) multilayered institutional conflicts, including chronic licensing ambiguity, asymmetric competition with state-affiliated actors, and inter-ministerial jurisdictional conflict; (2) an asymmetric dependency network, featuring the novel finding of a "hidden mutual dependency" of the state on the digital ecosystem that remains unacknowledged despite its economic significance; (3) a hybrid normative order, in which strong informal working rules have substituted for weak formal institutions but simultaneously create a "scalability ceiling"; and (4) eight institutional upgrading mechanisms operating at the micro, meso, and macro levels, whose convergence with existing quantitative evidence (e.g., Alves & Fischer's 2024 findings on regulatory ambiguity) was confirmed.



Conclusion: Iran's startup ecosystem is caught in an "institutional trap" arising from the interaction of three simultaneous pathologies — conflict, hidden dependency, and a substitute order with a growth ceiling. The findings indicate that this trap cannot be resolved by a single-point reform of one rule or institution; the proposed upgrading mechanisms, ranging from regulatory sandboxes to joint public–private committees, must intervene simultaneously at multiple points to break the trap's self-reinforcing cycle. By introducing the "hidden mutual dependency" finding and the empirical "scalability ceiling" threshold, this study offers a theoretical contribution that goes beyond the existing descriptive ecosystem literature.

Conclusion: Iran's startup ecosystem is caught in an "institutional trap" arising from the interaction of three simultaneous pathologies — conflict, hidden dependency, and a substitute order with a growth ceiling. The findings indicate that this trap cannot be resolved by a single-point reform of one rule or institution; the proposed upgrading mechanisms, ranging from regulatory sandboxes to joint public–private committees, must intervene simultaneously at multiple points to break the trap's self-reinforcing cycle. By introducing the "hidden mutual dependency" finding and the empirical "scalability ceiling" threshold, this study offers a theoretical contribution that goes beyond the existing descriptive ecosystem literature.