Opportunity or necessity? The spatial determinants of entrepreneurship in South Africa

Willem A. Naude and Louw Van Der Walt

International Journal of Entrepreneurship and Small Business, 2006, vol. 3, issue 2, 245-265

Abstract: In South Africa's mainly rural provinces, the lack of entrepreneurial activity may be due to the lack of opportunities or the lack of ability to engage in opportunities. If the latter is the case, then one would predominantly see entrepreneurial activity arise out of necessity. To find an empirical answer to the question, we focus on the determinants of profits and profit rates across the magisterial districts of these two provinces. We use panel data across 50 magisterial districts from 1996 to 2001, in both a simple OLS model as well as a one-step GMM panel data model, to find that profits are higher in those districts with higher levels of educational attainment. Profits are also high where the informal sector is smaller. This suggests that the informal sector attracts mainly necessity entrepreneurs. The findings in this paper are also consistent with a situation wherein those unemployed from the rural areas migrate towards urban areas to join the informal sector in those areas. This kind of migration depresses profit rates in these urban areas.

Keywords: entrepreneurship; South Africa; entrepreneurial activity; entrepreneurs; spatial distribution; economic activity. (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijesbu:v:3:y:2006:i:2:p:245-265

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