Entrepreneurial Success in Africa: How Relevant Are Foreign Direct Investment and Financial Development?

Jonathan Munemo

African Development Review, 2018, vol. 30, issue 4, 372-385

Abstract: A panel dataset of 28 African countries spanning the period 2004–2014 is used to empirically analyze the effects of foreign direct investment (FDI) and financial development on new business density, a critical measure of entrepreneurship. Panel fixed effects and dynamic panel regressions were estimated while controlling for other important factors that influence entrepreneurship. The paper finds that FDI enhances entrepreneurship in African countries with more developed financial institutions and markets. These countries have greater absorptive capacity needed to benefit from potential FDI spillovers. In addition, the results also show that improving all the different dimensions of financial development (depth, access, and efficiency) is important for stimulating new entrepreneurial activity.

Date: 2018
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